It is a risk-free short to medium term investment available for investment public in Nigeria. (Those who would like to know every detail about Treasury Bill may indicate)
Treasury Bills are traded in two different markets
1. The Primary Market Operations (PMA)
This takes place mostly on Fridays and it is mostly 91 days tenure instrument of primary market segment issued by Central Bank of Nigeria (CBN). They usually advertise this in Nigerian Dailies.
2. The Open Market Operations (OMO)
This includes government security instrument traded in the Secondary Market, specifically Nigerian Stock Exchange (NSE) mostly from Mondays to Thursdays. It has varied bids for different tenure; 21, 28, 48, 91 days etc. This is where everyone can participate easily.
Participating in Treasury Bills
You can easily participate in the OMO through your banker or your stock brokers or applying directly through discount houses. But believe me, it is easier to participate through your bankers and/or stock brokers.
Note that once you have a Current Account with any bank in Nigeria, you are assigned with a relationship agent whose functions for you include (but not limited to) the following:
1. Negotiating bank facilities like overdraft and loans for you
2. Confirming all transactions on your account especially on third party payments
3. Carrying out short term investment on your funds if you wish to. This includes trading on Treasury Bills through the OMO Facilities and Fixed Deposits.
This noted, you have to take the following steps to participate in trading Treasury Bills:
1) Open and operate a Current Account with a reliable bank in Nigeria
2) Fund your Account adequately
3) Maintain a good banking relationship with your banker through your account officer
4) Place orders for them to bid for you in the OMO of the NSE
In other words, once you have a current account with a good bank and a trustworthy relationship (accounts) officer, give him the other to bid for you. Alternatively, you can use your stockbroker.
Furthermore, the following are involved in the trading of Treasury Bills through OMO and it is very important you know them well and negotiate with your banker or broker:
1. Bid Rate: percentage interest in respect to the amount
2. Tenure Instrument: Number of days to mature, say 21 days, 48 days, 91 days etc.
3. True Yield: Percentage interest expected to yield at the end of the tenure
4. Roll Over: A standing order given to your bankers to reinvest the capital and the
end of the tenure, when both the capital and interest have been paid
by CBN
Basically, investing in Treasury Bill is a relatively low risk investment, as the only risk associated with it is only the possibility that your bid might not be successful. But in this case, you do not lose your capital. So it’s actually risk free.
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