Step‑by‑Step Guide to Investing in Treasury Bills in Nigeria and Kenya

Why Treasury Bills Matter for You

If you are a student, or a working person in Nigeria, Kenya, or elsewhere in Africa, you likely want ways to grow your money safely. One of the safest and simplest government investments is Treasury Bills (T‑Bills).

Treasury Bills are short-term government debt instruments. When you buy a T-Bill, you are lending money to your country for a fixed time, and the government pays you back with a small profit. Because they are backed by the government, they are among the lowest-risk investments.

This guide will walk you—step by step—through investing in T-Bills in Nigeria and Kenya:

• What T-Bills are, how they work

• Differences and similarities in Nigeria vs Kenya

• Step‑by‑step process for each country

• Pros and cons

• Comparisons with other investments

• Real examples

• A summary table

• 10+ FAQs

By the end, you should feel confident investing in T-Bills in either country (or comparing them).

What Are Treasury Bills?

A Treasury Bill is a short-term government security issued at a discount (below face value) and redeemed at face value at maturity. You don’t receive periodic interest payments; your profit is the difference between what you paid and what you receive at maturity.

In simple terms:

• You pay less than the “face value” now

• After a few months (depending on tenor), the government gives you the full face value

• The difference is your earnings (interest)

Because they are backed by the government, T-Bills are considered very safe investments.

Key Characteristics and Terms

Because they don’t pay interest periodically, the return is “built into” the discount you receive.

Why Invest in Treasury Bills? (Advantages and Risks)

Benefits of Treasury Bills

1. Safety / Low Default Risk
   Since they are backed by the government, the chance of default is low (though not zero).

2. Simplicity
   The mechanics are straightforward: buy now at discount, receive face value later.

3. Liquidity
   In many cases, you can sell T-Bills in the secondary market before maturity (depending on the country).

4. Short-Term Horizon
   They mature in months, making them ideal for short-term savings or parking money.

5. Predictable Return
   You know upfront what the yield (discount) is, so your profit is clear.

6. Low Risk for Inflation (if rates are good)
   If the yield is higher than inflation, your real purchasing power grows.

Risks and Limitations of Treasury Bills

1. Inflation Risk
   If inflation is high, your real return (after inflation) may be low or negative.

2. Reinvestment Risk
   When your T-Bill matures, rates might be lower, reducing future returns.

3. Interest Rate Risk (secondary market)
   If interest rates go up, the value of existing T-Bills may drop in the secondary market.

4. Limited Yield
   Because they are short-term and safer, yields tend to be lower than riskier investments.

5. Minimum Investment / Access Constraints
   In some countries, direct access is limited to those who can meet high minimums.

6. Taxes / Withholding
   Some countries deduct tax on the earnings or withhold before payment.

You must weigh benefits vs risks and match T-Bills to your goals and timeframe.

Comparison: Nigeria vs Kenya — How Their T‑Bill Systems Work

Before diving into how to buy in each country, it helps to compare their structures and features.

This comparison gives you a quick grasp of how similar or different the two systems are. As you see, the concepts are alike, but practical rules (minimums, tax, liquidity) differ.

Step‑by‑Step Guide: Investing in Treasury Bills in Nigeria

Let’s go deeply, step by step, through how to invest in T-Bills in Nigeria.

Step 1 — Learn the Issuance Schedule & Auction Announcements

• The CBN issues T-Bills every two weeks (typically Wednesdays) via auction.

• Before each auction, CBN publishes announcement of issuance (tenors, amounts, dates).

• You need to monitor CBN website, national newspapers, or banks for the notice.

Step 2 — Choose the Tenor (91, 182, or 364 days)

• Decide how long you’re willing to lend (3, 6, or 12 months).

• Longer tenors often yield more, but they lock your money for longer.

• Consider your cash needs — don’t lock up money you might need soon.

Step 3 — Decide Whether to Apply via Primary or Secondary Market

• Primary market: You bid in the new auction. But direct primary participation has a high minimum (e.g. ₦50 million)

• Secondary market: You can buy existing T-Bills from banks, brokers, or discount houses. Here the minimum is lower (often ₦100,000 plus in multiples of ₦10,000)

If you have limited capital, you’ll likely go via secondary market or through pooled schemes that aggregate many small investors.

Step 4 — Contact an Authorized Dealer (Bank / Broker / Discount House)

• To bid or to buy in secondary market, you must use a licensed dealer, such as banks or stockbrokers.

• Ask them to help you fill T-Bill bid forms.

• Provide your bank account, identity, and necessary documentation.

Step 5 — Submit Bid / Application Before Deadline

• Fill out a subscription form: your name, amount, bid rate (stop rate) and tenor.

• Submit before the cutoff time (usually on auction days, e.g. Wednesday afternoon).

• There’s a “stop rate” you specify — you are saying the maximum discount rate you accept. If the auction cutoff is lower, you may be awarded at the cutoff.

• For secondary market, you negotiate purchase terms.

Step 6 — Wait for Auction Results & Allocation

• After auction, CBN publishes accepted bids and cutoff rates.

• If your bid was successful, the allocated amount will be confirmed.

• You may get full or partial allocation depending on demand.

Step 7 — Make Payment

• Pay to CBN via your dealer (bank / broker) within the stipulated time.

• For example, if you bid for ₦100,000 face value at 10% discount, you may pay ₦90,000 now.

• Ensure your funds are ready in your account.

Step 8 — Post-Allocation & Holding

• Once payment is confirmed, your T-Bill is registered in your name (via your dealer).

• You hold until maturity (91, 182, or 364 days).

• You can optionally sell before maturity via secondary market (depending on liquidity).

Step 9 — At Maturity (Redemption)

• At maturity, the government pays you the full face value into your bank account.

• That means your profit is the difference between face value and what you paid.

Step 10 — Reinvest or Withdraw

• You can choose to roll over (reinvest) into another T-Bill or withdraw cash.

• Compare the yields of new issues and your needs.

Example (Nigeria)

Suppose you apply for a ₦100,000 face value 364-day T-Bill. The auction discount rate is 15%. You pay ₦85,000 now. After 364 days, the government gives you ₦100,000. Your profit is ₦15,000.

If you instead use secondary market and buy a T-Bill halfway through its tenor, you may pay a price above or below face value depending on yield, so your effective yield may differ.

Step‑by‑Step Guide: Investing in Treasury Bills in Kenya

Next, we go through how to invest in T-Bills in Kenya, step by step.

Step 1 — Open a CDS / CSD Account with CBK

• In Kenya, you need a Central Depository System (CDS) (or CSD) account through CBK to hold government securities.

• You usually have to:

  • Have a bank account

  • Fill out a mandate card

  • Provide ID, passport photograph

  • Authorize two bank signatories

  • Submit to CBK branch or via a broker

  • Wait for account activation

Once this is done, you can participate in all T-Bill and bond auctions.

Step 2 — Monitor Upcoming T-Bill Auctions

• CBK auctions T-Bills weekly with tenors of 91, 182, 364 days.

• Check the CBK website or financial news for the auction calendar.

• Auctions include details: issue number, face value, tenor, closing date for bids.

Step 3 — Select the Tenor You Wish to Invest

• Choose if you want 3-month (91 days), 6-month (182 days) or 12-month (364 days) T-Bills.

• Shorter tenors are more liquid, longer ones yield more (generally) but tie up funds.

Step 4 — Submit Bid (Competitive or Non‑Competitive)

• In Kenya auctions, you can choose competitive bid (you propose a discount rate) or non‑competitive bid (you accept the average rate).

• Competitive bids may or may not be accepted depending on cutoff rate.

• Non-competitive bids are guaranteed allocation but yield is based on average accepted rates.

Step 5 — Auction Results & Allocation

• CBK’s Auction Management Committee meets and sets the cutoff rate.Results published via CBK, media, and to investors.

• Your allocated T-Bill, if your bid was successful, will be registered.

Step 6 — Make Payment

• You pay the discounted price (less than face value).

• Payment due often by the following Monday by a set time (2 pm).

• Methods: bank transfer, banker’s cheque, or via brokers.

 Step 7 — Holding the T‑Bill

• Once paid, your T-Bill is held in your CDS / CSD account.

• You wait until maturity.

• Kenya’s T-Bills are generally not tradable on stock exchange; liquidity via OTC or through CBK mechanisms.

Step 8 — Maturity / Redemption

• At maturity, you receive the full face value deposited into your bank account.

• Profit = face value minus price paid.

Step 9 — Reinvestment / Rollover or Withdraw

• You may choose to roll over the proceeds into another T-Bill.

• Alternatively, withdraw or allocate differently.

Example (Kenya)

Suppose you bid KSh 100,000 face value 91-day T-Bill, auction discount is 10%. You pay KSh 90,000. After 91 days, you receive KSh 100,000. Your profit is KSh 10,000 (before tax). If withholding tax applies, net is lower.

Pros, Cons, Comparisons & Tips

Pros & Cons Recap with Nigeria & Kenya Context

Comparing T‑Bills with Other Investment Options

T-Bills are ideal for when you want to preserve capital with a modest return for a few months. Bonds are better for longer periods; stocks are for those who accept volatility and want higher returns.

Practical Tips to Improve Your Success

1. Start small, learn gradually — Don’t commit all your money at once

2. Monitor inflation & interest rates — They affect real return

3. Use non-competitive bids (in Kenya) if you are less confident in estimating rate

4. Compare across tenors — Sometimes 91-day may yield better than 182-day

5. Watch auction announcements and deadlines carefully

6. Work via trusted banks or brokers to avoid fraud

7. Reinvest smartly — roll over only when new issue yields are favorable

8. Track your holdings with spreadsheets or apps

9. Don’t expect huge gains — T-Bills are about safety, not huge wealth growth

10. Diversify — Don’t put all your money in T-Bills; mix with bonds, equities, etc.

Common Pitfalls and How to Avoid Them

By being aware, you reduce the chance of making mistakes.

Real‑Life Examples to Illustrate

Nigeria Example

• Mary in Lagos buys a 364-day T-Bill face value ₦1,000,000 at 18% discount rate. She pays ₦820,000 now. At maturity, she receives ₦1,000,000. Profit = ₦180,000.

• John wants liquidity, so he buys a 91-day T-Bill face value ₦200,000 at discount 10%. Pays ₦180,000. In 91 days, receives ₦200,000.

Using apps like i-invest in Nigeria, you can start with smaller amounts and manage your T-Bills easily I-Invest NG.

Kenya Example

• A student in Nairobi invests KSh 100,000 in a 182-day T-Bill with discount rate 12%. Pays ~ KSh 88,000 (approx). After 182 days, receives KSh 100,000. Profit ~ KSh 12,000 before withholding tax.

• A teacher prefers liquidity, picks 91-day T-Bill at 10% discount. Pays ~ KSh 97,500 for a KSh 100,000 face. After 91 days, gets KSh 100,000.

In Kenya, the non‑competitive bid option is beneficial for many retail investors, especially novices.

Summary Table: Comparison & Process at a Glance

Frequently Asked Questions (FAQs)

Here are common questions people ask about investing T-Bills in Nigeria and Kenya:

1. What is the minimum amount I can invest in Nigerian T-Bills?
   In the primary market, it’s very high (₦50 million, though some pooled arrangements exist). Secondary market via banks may allow ₦100,000 minimum or in multiples of ₦10,000.

2. What is the minimum for Kenyan T-Bills?
   KSh 100,000 face value, in multiples of KSh 50,000.

3. Do T-Bills pay interest periodically?
   No. They are sold at a discount and redeemed at face value. The “interest” is implicit in the difference.

4. Are earnings from T-Bills taxed?

   • In Nigeria: sometimes exempt under certain rules, but verify locally.

   • In Kenya: subject to withholding tax (WT) of 15%.

5. Can I sell my T-Bill before maturity?

   • Nigeria: Yes, via secondary market through dealers.

   • Kenya: Usually limited; may be possible OTC or via depository mechanisms.

6. Which tenor gives the best yield?
   Longer tenors often offer higher yields, but not always. You should compare auction yields for 91, 182, 364-day tenors before bidding.

7. What happens if I miss the payment deadline?
   You may lose your allocation or be barred for future auctions. Always ensure funds are ready by payment date.

8. Can foreigners invest in T-Bills in Nigeria or Kenya?
   Possibly. Usually you require a bank account in that country, valid ID, and sometimes to go through a bank as nominee or agent.

9. How is the yield (discount) calculated?
   Yield = (Face value – Purchase price) / Purchase price, annualized to days in year.

10. What is non‑competitive vs competitive bid (Kenya)?

    • Competitive bid: you set your discount rate.

    • Non-competitive bid: you accept the average rate; guaranteed allocation but yield is not fixed by you. Wealth Architects+1

11. How do I reinvest after maturity?
    Use the proceeds to bid in new T-Bill auctions or withdraw.

12. Which is safer: T-Bills or bank fixed deposits?
    T-Bills are often safer (government-backed) and more liquid. Fixed deposits depend on bank stability.

Tips for Students & Working Class Citizens

• Start small — use secondary markets or pooled options if you lack large capital

• Use technology / apps — e.g. in Nigeria, apps like i-invest simplify T-Bill purchases I-Invest NG

• Learn bidding strategies — non-competitive may be safer initially

• Track inflation — don’t let inflation eat your gains

• Avoid locking funds you might need — use short tenors initially

• Use spreadsheets or apps to monitor maturity dates and returns

• Don’t chase high yields blindly — weigh risks

• Diversify your investments — T-Bills are part of your portfolio, not all

Conclusion & Key Takeaways

Investing in Treasury Bills in Nigeria and Kenya offers a safe, straightforward way to grow money in the short term. While the systems differ in details (minimum amounts, tax rules, liquidity), the core concept is similar: buy at a discount and receive full face value at maturity.

Here’s what you should remember:

• Understand tenors, discount mechanism, and yields

• Use authorized dealers / brokers

• Pay attention to auction announcements, deadlines, and results

• Be aware of tax and inflation

• Compare Nigeria vs Kenya rules before choosing

• Use non-competitive or pooled routes if your funds are small

• Don’t expect huge returns — T-Bills are about safety and modest return

• Always keep liquidity and your financial goals in view