T-bills explained

A Treasury bill is a short-term loan to the Federal Government of Nigeria, issued through the CBN in 91-day, 182-day and 364-day tenors. It is the closest thing to risk-free that exists in naira: the government can always print the currency it owes you. The risk you actually carry is inflation, not default.

T-bills do not pay interest along the way. You buy at a discount and receive face value at maturity; the gap is your return. Pay ₦941,000 today for a 91-day bill with ₦1,000,000 face value, and in three months CBN credits you the full million.

In effect you earn the interest upfront, which is also why the quoted rate understates your return.

At each auction, investors bid the discount rate they want. CBN fills from the lowest bids upward and stops when the offer is covered: that cut-off is the stop rate. Bid above it and you get nothing.

But the stop rate is a discount rate on face value, while your return is earned on the smaller amount you actually paid. A 17.5% stop rate on a 364-day bill means paying about ₦825,500 per ₦1M of face value; earning ₦174,500 on ₦825,500 is a true yield of roughly 21.1%. Always convert before comparing against an MMF or fixed deposit.

Primary auctions run roughly every two weeks. You submit a bid through your bank or broker; many institutions pool retail orders from as little as ₦100,000 even though direct minimum bids are far larger. You can bid 'non-competitive' and simply accept the stop rate.

The secondary market is the other door: buying an existing bill from another investor, at whatever rate prevails that day. It is also your exit if you need cash before maturity, at the prevailing rate rather than your locked-in one.

T-bill interest is exempt from withholding tax for individuals, which makes the comparison with taxed alternatives even more lopsided: a 21% true yield untaxed beats a 23% MMF yield that loses 10% of distributions to WHT.

Choose tenor by when you need the money, not by the headline rate. The extra yield on the 364-day over the 91-day (the term premium) is real but small; it is not worth locking away money you will need in month four.

A 21% yield in a year of 30% inflation is a 9% loss of purchasing power. T-bills are still usually the best naira cash instrument available, but 'best available' and 'actually growing wealth' are different claims. Check the real yield before celebrating.

Instead of one big bill, stagger several across tenors so something matures every month or two. You keep regular access to cash, capture the longer-tenor premium on most of the money, and every maturity is a fresh decision point at current rates rather than a single all-or-nothing rollover.