The Lion King | 11
Feature
N
igerian Treasury Bills
(NTB) are short term debt
instruments issued by the
Central Bank of Nigeria (CBN) on
behalf of the Federal Govern-
ment of Nigeria for short term
financing of the government.
In simple terms, the issuance
of Treasury Bills is a way for the
Nigerian Government to raise
money from the general public.
The Bills are usually issued for
tenors of 91, 182 and 364 days at
a biweekly auction organized by
the CBN.
Features and Benefits of Treasury
Bills:
• Tenors of 91, 182 and 364 days
are available through the
primary market.
• They are issued at discount to
their face values (i.e. interest
is payable up-front).
• Interest received is not
subject to withholding tax
(tax free)
• Free from default risk: repay-
ment is guaranteed by FGN
at maturity.
• They can be used as collat-
eral to raise funds.
• They are easily re-discounted
or sold for cash.
• Treasury bills are tradable in
the secondary market.
There are two options available
to an investor of Treasury bills:
Option 1:
• The purchase of NTBs can
be made from the primary
market conducted fortnightly
by CBN.
• Potential investors submit
bids to CBN through a Money
Market Dealer (MMD) indicat-
ing face value, tenor and
rate of interest (UBA Plc is a
licensed MMD).
• CBN sells NTBs to customers at
specified rates as long as the
rates are lower or same as the
CBN stop or cut-off rate.
• At maturity the customer is
credited with the face value.
Option 2:
• Investors can also purchase
treasury bills from the second-
ary market at any time by
sending a written purchase
of bills request to UBA Fixed
Income Traders via the
Business Office on tenors
available for sale.
• Secondary market settlement
is done on T+2 bases (Trade
date + 2 working days period)
or based on tenors available
for sale.
• The bills purchased by the
investor can be held in a
Nominee Account managed
by UBA Global Investors’
Services.
• At maturity the customer is
credited with the face value.
In summary, an investment in
Treasury Bills is popular because
of the affordability, the low level
of risk involved and its liquidity
status.
Understanding
Nigerian
Treasury Bills
By ‘Kemi Akinoye
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