Treasury Bills of Nigeria are short-term securities issued at a discount for a tenor ranging from 91 to 364 days, such that the income received is the difference between the purchase price and the amount received at maturity or prior to the sale, according to the Central Bank of Nigeria.
To invest in Treasury Bills, all that a customer needs to do is to go to any of his/her bank branches, fill and submit an application form, state his bank account, amount to be invested from his deposit and the preferred tenor.
It is one of the investment areas accessible through banks to enable customers to invest in high-yielding assets, which are non-risky and tax-free.
They are good investments for idle savings, which yield returns, and they are also very liquid and can be converted to cash quickly.
A report by www.thestreet.comfurther explained that Treasury Bills are the shortest-term Treasury securities, those that mature within a year (from the time they are issued). The Treasury issues three- and six-month bills weekly and a one-year bill (the so-called year-bill) once a month.
Treasury Bills are discount instruments. Rather than making interest payments, they are issued at a discount to face value and mature at face value. The interest rate is a function of the purchase price, the face value and the time remaining till maturity.
Bills are quoted in terms of their discount rate, or interest rate based on a 360-day year. As with bond yields, when the discount rate is going up, a bill is losing value. A “bond-equivalent yield” can be calculated for a bill, to allow for a comparison with other debt instruments
According to http://money.howstuffworks.com,Treasury Bills, also known as “T-bills,” are a security issued by the government. When you buy one, you are essentially lending money to the government. Here, the term security means any medium used for investment, such as bills, stocks or bonds.
Treasury Bills have a face value of a certain amount, which is what they are actually worth. But they are sold for less. For example, a bill may be worth N10,000, but you will buy it for N9,600. Every bill has a specified maturity date, which is when you receive the money back. The government then pays you the full price of the bill, in this case N10,000, and you earn N400 from your investment.
The amount that you earn is considered the interest, or your payment for the loan of your money. The difference between the value of the bill and the amount you pay for it is called the discount rate, and is set as a percentage. In the example above, the discount rate is four percent, because N400 is four percent of N10,000.
Treasury Bills are one of the safest forms of investment in the world because they are backed by the government. They are considered risk-free. They are also used by many other governments throughout the world.
Benefits of saving your money
Saving money is advantageous because it provides people the opportunity to earn interest while keeping their money safe. Investing money can be risky, but it offers higher returns than bank savings accounts and can help people build wealth over the long-term, according to http://thefinancebase.com.
Savings accounts and other savings vehicles such as fixed deposit are advantageous because they provide the accountholder with the opportunity to earn interest on his savings, while having little to no risk. While the interest rates are typically low, the amount earned in interest is incentive for saving. Savings accounts and money market accounts are designed to provide the accountholder with anytime access to his money. Fixed deposits impose a penalty if the funds are withdrawn before the expiration date of the certificate, but generally have higher interest rates than savings accounts.
The advantage of investing is the opportunity it provides for building wealth over the long-term. Diversification is a risk-minimising concept that spreads money between different types of investments, which can offset losses in one investment type with gains in another.
Traditional investments include stocks, mutual funds and bonds. These are securities that are issued by companies and governmental units for the purpose of raising capital.
Real estate is another effective type of investment, as it is generally considered to be safe and conservative. Some people invest in collectible items. Investing money in stocks, bonds and real estate, however, does come with risks and is not guaranteed a return. Because of the risks, the returns on these investments are typically higher than those on savings accounts