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A Treasury Bill is a Federal Government short-term debt instrument, usually issued for up to 91 days. It is a discountable instrument, which means you earn interest up-front. These are presently the most secure instruments in the market as they are rediscountable with the CBN, at any point in time through any authorized dealer (banks and discount houses). Thus liquidity is guaranteed with minimum risk to the purchaser that chooses to sell.

Investment in Treasury Bills can be effected in either the primary market or the secondary market.

This is where Treasury Bills with 91 days tenor are sold to investors at rates investors bid, while the stop rate (maximum selling rate ) is determined by the CBN. The CBN conducts auction weekly and payments for the bills are on discounted value. On maturity the face value is paid to the investor, on presentation of the physical treasury bill certificates for redemption by EDL, an authorised dealer.

Results are released on Thursdays (auction day) and the treasury bills are allocated to successful bidders for which payments must be made on that day.

For an investor to participate in the primary market through EDL, the following procedures would apply:

Write a letter to EDL authorising us to purchase primary market treasury bills on your behalf stating the face value, bid rate, and the auction date.
Forward the cheque for the discounted amount, plus the commission of 0.125% flat (based on the face value) to EDL (allow for the normal 4 working days clearing of the cheque).
Immediately the physical treasury bills certificates are received by EDL, they will be forwarded to the client for safe keeping.

EDL is also placed to offer custodial services at a minimal charge should the client so desire.

Redemption

Redemption will only be entertained by the CBN on presentation of the physical bills at their office.

It is therefore advisable that clients forward their physical bills to EDL at least two (2) days before the maturity date to enable us process for redemption on the maturity date. Funds received will be forwarded to the client once CBN credits EDL’s account with same.

If the investor cannot hold the bills to maturity, EDL can purchase such bills at rates agreeable to both parties, thereby providing the client with the required liquidity. The CBN provides benchmark rates for rediscounting treasury bills.

However, the original certificates must be endorsed and given to EDL to enable the house present these to the CBN for rediscounting. Payment will be made to the client the next day on confirmation of receipt of funds from the CBN.

This is the market where pre-issued Treasury Bills are sold. There are two segments of the secondary market.

Buying from EDL as a discount house. You can buy whatever tenor suits your investment needs. However, by its nature as secondary bills, physical certificates are not available. EDL shall give you a contract letter evidencing the purchase. Rates will be agreed in line with CBN’s rates.
Buying from the Open Market Operation. Like the primary market, the Open Market Operation popularly called (OMO) is an auction-based system.

OMO is conducted weekly by the CBN, purchases are recorded in favour of the successful banks in their Treasury Bills account with the apex bank. Non-banks do not have such accounts therefore their purchases of OMO bills are held on their behalf by discount houses or banks.

If for any reason the investor cannot hold the bills to maturity, EDL can purchase such bills at rates agreeable to both parties, thereby providing the client with the required liquidity.