Nigeria Stops Sale Of Treasury Bills To Anyone Who Doesn’t Have N50 million


Nairametrics| The Federal Government announced on Tuesday that it will no longer be selling Treasury Bills to retail investors. In what it called a “New Market Structure” the Debt Management Office (DMO) said the minimum amount that can be used to invest directly in Treasury Bills is now N50, 001,000. This effectively puts it out of the reach of retail investors.

Implication

This means that anyone who wishes to buy Treasury Bills but does not have up to N50 million must buy through a bank in the secondary market. The major difference now is that; you are now at the mercy of a bank and may have to collect lower yields. Treasury Bills yields have sky rocketed of late, trading for as high as 20% for a one year yield. It is unclear if the rate you get at a secondary market will be the same as what you get in a primary market. Banks, who have complained about the effect of high yield Treasury Bills on getting cheaper deposits, will breathe an air of respite as retail investors will be marketed fixed deposits and other bank products which hitherto could not compete with Treasury Bills.

Why this change

The DMO in a publication in the papers explained that it had introduced a new Market Structure since it has now introduced what it calls FGN Savings Bonds. The FGN Savings Bond, unlike Treasury Bills and FGN Bonds, will have a tenor of 2-3 years and quarterly interest rates. Treasury Bills have a tenor of 91 days, 182 days and 364 days respectively. Each tenor comes with an interest calculated per annum. FGN Bonds are as high as 10 years.

So apparently, the government is inadvertently rerouting retail investments in Treasury Bills to its FGN savings bonds program, freeing up short term T-bills for commercial banks. The new FGN Savings bonds can be bought for as low as N5,000 in multiples of N1,000.

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What others say about : Nigeria Stops Sale Of Treasury Bills To Anyone Who Doesn’t Have N50 million..


Nairametrics

We fel, It means for you to buy Treasury Bills, you will have to hope that the bank can sell to you. You can’t buy from the primary market any longer.

Anonymous

Good evening, I want to ask for the implications of this new directive on small investors and how can small investors now purchase t-bills. Thank you.

Okwuchi

You would have to purchase secondary market treasury bills via your bank. Small investors can also purchase the savings bond.

Emmanuel Ewumi

We can always buy in the secondary market, but I am sure retail investors friendly banks as per Treasury Bill investments like First Bank and Union Bank will find a way round this.

Emmanuel Ewumi

I was just debuted by First Bank for the next NTB bid slated for 15th March 2017
. I think the directive is meant for Financial Institutions who bid on behalf of investors.

bridgetranslation

purchasing via secondary market may lead to low interest rates and bank charges. if the DMO wants to help Nigerians, dey should fix a near or same interest rate for the FGN Savings Bond just like the TB’s .

Anonymous

(1)How safe are investors’ capital in buying bonds / T.Bill via secondary market eg via commercial bank that can close shop due to mismanagement?.

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