DILEMMA CALLED THE NIGERIAN TREASURY BILL

 The Nigerian Treasury Bill; 

hmm....

Hi Guys, 

It's already a month we began this journey to financial literacy together.

Happy new month people; I wish you the very best of the festive seasons and please try to make someone smile this December.

According to investopedia, treasury bill is a short term government debt obligation backed by the treasury department or CBN in Nigeria's case with a maturity of one year or less (mostly on quarterly basis). They are low risk and secure investments. Let's simply put it this way, when government wants to finance public projects and are unable to raise funds they issue IOUs (I Owe You) to investors stating they have collected a certain amount from them and effectively pay interest immediately while your investment runs for the agreed tenor. 

A lot of factors influence the interest rate of Treasury bill amongst which are the treasury bill auctioneers and types of bidders, market impact and most importantly the economy's inflation rate. Interest rate normally should never be lower than a country's inflation rate. It should either be higher or at par with the country's inflation rate.

I came across the news headline that Nigeria's treasury bill rate is now in negative meaning that if you invest at the moment you would even be paying the government money for holding on to your money to fund their projects. This is a big anomaly as all key indications point to the fact that Nigeria's t-bill rate should actually stand around 14% which is Nigeria's current inflation rate. The Nigerian government do not have any genuine revenue generator to back their decision to reduce the t-bill rate as they are seeking for loans from other countries. 

The response of the government or the central bank of Nigeria, was that this was done to control big financial institutions from investing their pool of funds into government backed investments and to otherwise force their hands to give out loans at very low interest rates. 

What are your thoughts on this decision?

Comment and let's discuss. 

Treasury Bill is no longer an investment option at the moment my people.

Thank you,

Your Very Own Financial Times. 

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