Q: How do Treasury Bills work?
T-Bills are discount instruments, and they are so called because the investor gets its interest upfront. This means that the interest promised on a T-bill instrument is payable on the very day the investment commences. For instance, if a T-bill promises a 10.0% rate per annum and an investor wants to put in N100,000, the investor pays only N90,000 from the day of investment but gets back N100,000 at maturity. The maturity value (N100,000) is referred to as face value while the initial investment (N90,000) is discount value.
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Q: What are treasury bills?
Treasury Bills (T-Bills) are short-term debt instruments issued by the Federal Government of any country through its Central Bank to raise short-term funds from the public (private individuals, institutional investors, non-governmental organisations, ...
Q: Primary and Secondary Market for Treasury Bills
A T-Bill can be purchased either in a primary or secondary market. The primary market is when the investor buys directly from the CBN through a public auction carried out every fortnight while in the secondary market, an investor buys from an ...
Q: What are the other benefits of Treasury Bills?
It is a risk-free investment as it carries the guarantee of the Federal Government of Nigeria T-Bills are highly liquid instruments and can be used as collateral Liquidity-active secondary market for ease of entry and exit (though at a cost) Interest ...
Q: What do I benefit from investing in Treasury Bills?
Treasury bills in Nigeria are guaranteed by the full faith of the Federal Government; hence there is no default, if the government cannot pay, the CBN can print money to settle all investors. Treasury bills are fixed-income investments and income ...
Q: How do Commercial Papers work?
CPs are like Treasury bills (“T-Bills”) because they are issued at discount rates, which may be paid upfront or capitalized.