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INVESTING: How to make money from this week’s TBill auctions

INVESTING How to make money from this week’s TBill auctions

Treasury Bills are government-guaranteed debt instruments issued by Central Bank of Nigeria (CBN) on behalf of the former to finance expenditure.

The CBN is scheduled to hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on 17th January 2019.

It will be offering N5.8 billion, N26.6 billion, N193 billion for 91-day, 182-day, and 364-day maturity periods respectively.

Treasury Bills are sold through a bi-weekly auction conducted by the CBN.

Buyers are requested to quote bids following which the average minimum bid is selected.

Steps to buy

To buy Treasury Bills you will have to approach your bank requesting for a form. You fill the form with your personal information also indicating the amount you want to buy as well as your bid rate. However, with the advent of banks’ treasury bills mobile application, buyers are only required to fill a sign-up form once.

Nowadays the easiest way is through Sterling Bank’s Treasury bill mobile application. The app is accessible to all irrespective of their bank.

Gone are the days when the idea of investing in treasury bills meant owning millions in order to invest.

With I-invest app, just about anyone with a minimum of a hundred thousand Naira (N100,000) can go into the Treasury business. Irrespective of one’s knowledge of financial investment, the app makes it so easy for a novice to use.

Buyers indicate their bid rate

The bid rate is the likely interest rate that buyers have indicated to receive for the principal they are investing in the TB. The apex bank then selects the bids that fall below the accepted marginal rates. The Marginal Rate is the minimum average rate for bids submitted within a bid window while those above are rejected. Buyers can purchase TBs from the secondary market Over The Counter (OTC) through a broker.

For investors that want to sell their securities before maturity, this is done through the OTC market. The price at which you sell depends on the forces of demand and supply.

When is the interest paid?

The interest element of a treasury bill is paid to you upfront and credited to your bank account. The good thing is Interest derivable from Treasury Bills is not taxable.

However, investors can also give their bank a mandate to roll over the principal on Treasury bill upon maturity.

Treasury Bills are one of the safest forms of investment and are backed by the full faith and credit of the Federal Government of Nigeria.