Explainer: What Are Treasury Bills?

After my post yesterday, I received a flood of DMs asking for more information about Treasury Bills (T-Bills). Rather than reply to everyone individually, I’ve decided to write a full explainer. Whether you’re new to investing or looking for safe and smart ways to grow your money, this is for you.

What Are Treasury Bills (T-Bills)?

Treasury Bills are short-term debt instruments issued by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN). Almost every country offers this debt instrument.

In simple terms: When you buy a Treasury Bill, you are lending money to the Nigerian government for a short period — usually 91, 182, or 364 days (3 months, 6 months, 12 months). In return, the government promises to repay you the full amount at the end of the term, and you earn a return for lending them that money.

But here’s the twist: You don’t earn “interest” in the traditional sense. Instead, T-Bills are sold at a discount to their face value. It’s a financial jargon for saying, you get rewarded now, and paid the full sum you invested when your investment is due. At maturity, you are paid the full amount (also called “par value”).

A Simple Example:

Let’s say you want to invest ₦100,000 in a 91-day T-Bill at 5%:

You will pay less than ₦100,000 to purchase it — let’s say around ₦95,000.
At the end of the 91 days, you get back the full ₦100,000.

That ₦5,000 difference is your return (which many still refer to as “interest”).

So: You invest ₦95,000 — -> You get ₦100,000 back — -> You earn ₦5,000 — -> That’s effectively a 5.26% yield.

If anyone asks you to invest in TBills and does not satisfy this requirement of ‘upfront’ payment, think twice.

Why Choose T-Bills?

Someone was asking me why invest in TBills when the returns are usually lower than inflation. Well, a few reasons:

1. Safety: T-Bills are considered one of the safest investments in the world because they are backed by the full faith and credit of the Nigerian government. They are low-risk compared to stocks or crypto.

2. Predictable Returns: Before you invest, you know exactly how much you’ll earn. No surprises, no volatility.

3. Liquidity: Although they have a fixed term, T-Bills are highly liquid. If you need your money before maturity, you can sell in the secondary market and get your cash.

4. Short-Term Commitment: You don’t have to lock your money away for years. You can choose from 91, 182, or 364-day tenors depending on your goals and comfort level.

5. Tax-Free Returns: Interest earned on T-Bills is currently not subject to tax in Nigeria, I think. When I last invested in them, no tax was deducted. With the TeaNoobu government and their love for taxing everything, you can’t be too sure. So, confirm.

6. Regular Source of Income: You can continuously roll over your returns, investing again and again, creating a reliable income cycle. I know a man who invested so much in TBills throughout his professional life — whether yield was 30% (yes, it got as high as that this year) or 5% (yes, it could be as low, and the good thing is that you will always know before you invest) — and after retirement, he fuels his life with the yield he gets from his TBills.

Who Can Invest in T-Bills?

Anyone! Whether you’re:

• An individual saver
• A small business owner
• A corporate investor
• A financial institution

You’re eligible to participate, either in the primary market (auctions conducted by the CBN) or the secondary market (via banks and brokers). Most people invest through banks though.

How Much Can I Invest?

In the primary market, the minimum bid amount is ₦50,001,000 (50 million naira) in multiples of ₦1,000. This makes it mostly accessible to big institutions. However, in the secondary market, you can invest with as little as ₦50,001 (50 thousand naira) making it accessible to individual investors like you and me.

What Happens to My Money?

When you invest in T-Bills, the government uses your funds to:

• Cover budget deficits
• Fund infrastructure projects
• Support economic development

So in a way, you’re helping the country grow, if you believe that’s what’s really happening with your funds, and earning a reward while doing it.

Interest vs. Yield: What’s the Difference?

This is a question I get a lot, and it’s important to understand.

Interest: This is the nominal rate announced, say, 10%. If a ₦100,000 T-Bill offers 10% interest, that means you’ll earn ₦10,000. But because the T-Bill is sold at a discount, you’ll pay ₦90,000 and get ₦100,000 at maturity.

Yield: This tells you the real return on your actual investment. If you paid ₦90,000 and earned ₦10,000 profit, your yield is:
₦10,000 / ₦90,000 = 11.11%

So while the interest is 10%, your yield is higher, because you invested less and still got the full payout.

As you can see, you get your interest upfront. They announced 100k at 5% interest, but you only gave them 90k (discount). And at the end, you get 100k back.

Latest Treasury Bill Rates (as of May 21, 2025)

According to the latest auction results , here’s what the government is offering for T-Bills:
91 days — Yield: 18.86%
182 days — Yield: 20.39%
364 days — Yield: 24.31%

As you can see, the longer the tenor, the higher the yield. Nigeria has never defaulted on Treasury Bills or any other sovereign debt instruments in recent history, even during the sorry days of Muhammadu Buhari.

But invest in knowledge. Countries with high external debt, weak governance, currency devaluation issues, low foreign exchange reserves, and poor fiscal discipline are at risk. Honestly, I left TBills in 2017 because of Buhari’s crazy unorthodox policies. Still, Nigeria did not default in his 8 years. It was Ghana that underwent a domestic debt restructuring in 2023, which included short-term Treasury securities. Some domestic T-Bill holders had their terms changed (e.g., extended maturities, reduced rates), a type of technical default or distressed exchange. Still, there was no record that anyone lost their money. Longer maturity and reduced rates, but they still got their capital and interest.

When Should You Invest in T-Bills?

T-Bills are great if:

• You’re saving for something short-term (e.g., rent, school fees, travel)
• You want low-risk, predictable returns
• You’re tired of seeing your money sit idle in a regular savings account
• You want a break from the volatility of the stock or crypto markets

Tips for Investing in Treasury Bills

1. Compare Rates before investing. Some banks may offer slightly different returns in the secondary market. There is a bank I know that is the best in offering rates. I won’t mention their name because no one is paying me for creating awareness for them. So, do your research. Even 0.5% difference is massive.

2. Reinvest Your Returns. I am a great fan of compound interest. Let your money work harder by rolling over your returns into new T-Bill investments.

3. Ask Questions. Work with reputable banks or brokers and always understand the terms before committing. You toiled for your funds, dont give them up too easily. Ask questions. Read books. Okay, read Psychology of Money by Morgan Housel.

4. Watch Auction Dates. T-Bill auctions typically happen twice a month, announced by the CBN.

Lastly, TBills may not offer the most mouthwatering returns like the 5% per month MMM-like investments offer you or even stocks/crypto, but you will have peace of mind.

The man I told you about has over 250 million naira in treasury bills. With yields over 20%, he simply gives them about 210m and uses the remaining 40m for his cost of living for a year till the government gives him back his 250k at the end of the year. Sweet, right?

Treasury Bills protect your capital, deliver steady income, and help you sleep better at night.