I was recently approached by my Account Officer asking that I get some of my contacts to place some money in a fixed deposits. He says banks are now under pressure because of the “undue pressure” the CBN is creating for local banks. So, I asked him what their rates because the last time I asked it was just about 5% for N1m and 6-7% for N10m and above and 9% for N100million. He responds that rates have gone up now and that the bank could over a minimum of between 7% – 9% for rates above N1million.
Now, how in this world is a right thinking person supposed to keep his money in a fixed deposit when Treasury bills offered better rates?? If you don’t think this is an indecent proposal then maybe this will help you out;
Treasury Bills Yield are higher
As you can see TB’s have even better yields than Fixed deposits. The lowest Yield is between 10% and 11% per annum and that is for as little as N100k and above. You would have to invest a minimum of N5million in Fixed deposits to even get close to 7% per annum.
Deposit Rates are just too low
The highest fixed deposit rates the market can offer is not even up to 9%. You would have to deposit for 90 days and above to attract up to N8%pa.
Even Banks Get Higher Rates From Banks
Even the banks lend to themselves at rates above 10% In fact the lowest which is Call is about 10.5% compared to 3.8% for deposits.
It’s not hard to see which is better for you money. I will always pick Treasury bills over Fixed deposits for short term investments. For me to switch to Fixed deposits, rates had better be at least 200 basis (2%) higher than Treasury Bills.