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, religious bodies etc.) for the purpose of financing government budget deficit. In Nigeria, T-Bills are issued by the Central Bank of Nigeria (CBN) and it is guaranteed and backed with the full faith of the Federal Government of Nigeria. T-bills are issued at an interest rate often referred to as a discount rate.

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.

In the primary market, the CBN conducts T-Bills auction usually every fortnight and requests investors to quote the rates they are willing to pay on the different tenors of T-bills usually 91- day, 182-day and 364-day instruments. At the auction, the maximum rate at which the CBN is willing to sell is called the stop rate. Any investor that quotes below or at that rate gets the amount quoted and at the individual rate and any investor that quotes above the stop rate is bided out.

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 from T-Bills are tax-free. Investing in T-Bills encourages savings, and it can be easily converted to cash. T-Bills also pay higher interest than an investor will get from a Commercial Bank plus the fact that T-Bills certificate can be used as collateral for Bank loans.

Yes, you can sell T- Bills before maturity. However, the price at which you sell depends on the prevailing interest rate. For instance, a N1 00,000 Face Value (FV) T-Bills maybe selling for less or more depending on the prevailing interest rate as at the time of the sale as yield expectation influences interest rates. If your FV is trading at a higher price, it means you can sell your T-Bills at a profit as such your N1 00,000 can sell for N101,000 or more. If your FV is trading at a lower price, it means you can sell your T-Bills at a loss as such your N100,000 can sell for N99,000 or less.