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Pros and Cons of Investing In Nigerian Treasury Bills

Last updated on May 8th, 2024 at 11:59 am


In recent times, Nigerian Treasury Bills were being oversubscribed, indicating great demand by investors.


  • It is issued by the Central Bank of Nigeria on behalf of the federal government of Nigeria and is safe.
  • Returns on treasury bills are paid immediately and your subscription is activated so there is no regular payment of interest like FGN Bonds.
  • It is a predictable investment.
  • Treasury Bills are an easy model of investment and are accessible through banks and licensed brokers.
  • Investors have the choice to choose from the flexible tenor among 91, 182, and 364 days
  • Nigerian T-Bills are not tax-exempt.

For investors who are interested in government money market instruments, most of them prefer the ones that have a short-term maturity period, that’s one of the reasons they go for FGN T-Bills.

If you’ve never invested in FGN securities that are issued by the Central Bank of Nigeria (CBN), this article covers the guide on how to buy T-Bills in Nigeria, the benefits and the challenges that may come with investing in treasury bills.

Pros and Cons of Investing In Nigerian Treasury Bills

Understanding Nigerian Treasury Bills

Nigeria’s Treasury Bills are short-term government securities issued by the Central Bank of Nigeria on behalf of the Federal Government of Nigeria at a discount for a tenor ranging from 91 to 364 days and sold through an auction at a discount price such that the interest received is the difference between the purchase price and the amount received at maturity or prior to the sale.

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They are sold at a discount to their face value, meaning if you invest in T-Bills, you will receive the face value upon maturity.

The interest you will get on T-bills is the difference between the purchase price and what you’re paid at the end of the term.

The Central Bank of Nigeria (CBN) issues treasury bills on behalf of the federal government of Nigeria under its open market operations (OMO) strategy for everyone to purchase.

The CBN introduced the indirect or market-based technique of liquidity management using its Open Market Operations (OMO) in 1993.

Types of Treasury Bill 

Types of different treasury bills are made based on their tenor as thus:

  1. 91 days (Short term)
  2. 182 days (Medium term)
  3. 364 days (Long term)

How T-Bills Work in Nigeria

The interest on Nigerian T-bills is paid upfront while the investment sum is repaid at maturity.

Let’s use the November 2023 treasury bill as an example. Assuming you opted for the 91-day T-Bills at a discounted rate of 7% and you decided to invest N10,000,000, you will be debited N9,300,000 only.

This means that the 7% interest on your N10 Million – which is N700,000 – is paid to you immediately after your subscription is processed, and upon maturity, you are paid the face value N10 million.

Maturity period

The maturity period for Nigerian T-Bills is between 91 to 364 days. That’s why the Federal Government of Nigeria Treasury Bills is popular among Nigerians.

Benefits of Treasury  Bills

For the government:

  • Nigeria’s government issues treasury bills to raise short-term funds to finance its infrastructure expenditures.
  • It is an instrument for the FGN to manage its cash flow.
  • The government also uses treasury bills to control the money supply in the economy.
  • It is the best alternative for the government of Nigeria to raise funds instead of resorting to international borrowing that might come with high interest rates.
  • It is also a financial instrument used by the government to maintain liquidity in the financial system.
  • FGN issues high-value treasury bills to curb excessive money supply.
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For investors:

1) Short maturity periods: For investors who need their funds within a short period of time, investing in treasury bills is the best option for them because it has short maturity periods.

2) Easier divestment: Investors who are willing to terminate their T-Bills investment before maturity can do so through the secondary market.

3) Risk-free: It is risk-free and safe and backed by the government. Your investment is fully assured of full redemption after maturity.

4) Accessibility: It is designed to be easily accessible to investors. For instance, they are sold through a bi-weekly auction conducted by the apex bank.

So, you can purchase them when they are auctioned by the government through the bank and licensed brokers. We will cover the process of buying FGN T-Bills in our next guide.

5) Upfront payment of interest: Investing in Nigerian Treasury Bills allows you to receive the interest on your investment the same day your subscription is completed. No delays, no waiting till after three months or more.

6) Flexible tenor: Depending on your risk appetite, T-Bills allow you to choose your investment tenors.

Reinvesting after maturity: You can reinvest your CBN T-bills at the end of the tenor by purchasing another available T-Bills in the market or receive your original value back, the choice is yours.

The Downsides of Nigerian Treasury Bills

If you are investing in Nigerian T-Bills, you must be conversant with some of the challenges and downsides of doing so and make your decision based on your risk appetite.

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Here are well-known downsides of investing in Treasury Bills in Nigeria

Lower interest rate:

The interest rates may be lower than longer-term investments since they are short-term, this is peculiar to a low-interest-rate environment.


Considering the monthly inflation rate in Nigeria, your return may be affected by inflation.

Nigeria’s inflation rate closed at 16.95% at the end of year 2021 while there was an annual change of 1.89% between 2021 and 2022. The 2022 inflation rate in Nigeria ended at 18.85%.

In September 2023, the inflation rate at Africa’s biggest economy was 26.72%, according to the Nigeria Bureau of Statistics. And analysts predicted that it might jump to 27.9% for October 2023 which is expected to be released on November 14, 2023

What is the inflation rate for T-bills investors in Nigeria?

If the inflation rate was 6% and the T-bill discount rate was 4%, meaning your return has economically been wiped off by inflation.

Not tax-exempt:

The 10-year tax “exemption orders” for short-term federal government securities and bonds expired on January 2, 2022. The tax-exempt for Treasury Bills – as incentives –  became effective on January 2, 2012, and elapsed in 2022.

Tax-exempt for CBN T-bills and bonds was issued under the government of ex-President Goodluck Jonathan.

So, interest earned and proceeds from Nigerian Treasury bills are no longer tax-exempt.

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