Welcome, Guest: Register On Nairaland / LOGIN! / Trending / Recent / NewStats: 3,162,305 members, 7,850,093 topics. Date: Tuesday, 04 June 2024 at 02:14 PM |
Nairaland Forum / Nairaland / General / Investment / Why Nigerian Treasury Bills At 2% Is Actually A Good Thing (1004 Views)
Nigerian Treasury Bill Rates Drop To 3-year Low / How Do I Invest In Treasury Bills In Nigeria? 2019 Guide / Why Invest In Treasury Bills When Theres Stanbic's Mutual Funds? (2) (3) (4)
Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by prof2007: 9:48am On Oct 27, 2020 |
Latest stop rates from Nigerian Treasury Bill auction held last week reveals the lowest rates for T-Bills in recent times. 91-day bills had stop rates of 1%, the 182-day bills 1% and 364-day bills 2%. This is actually a good thing, as investors will become more creative, amongst other benefits. In 2019, the rate was as high as 13.029% – enough to give you a fighting chance with the equally high rate of inflation, as opposed to a savings account offering around 4%. However, while current prevailing rate of 2% might not be good news for investors; theoretically, the low rates could be better for the Nigerian economy. Why? 1. DOUBLE DIGITS RISK-FREE RATES IMPEDE DEVELOPMENT Having risk-free investment yielding guaranteed interest rate about 15% means investors can put in funds and fold their hands. Therefore, the option of making riskier investments become less alluring, as lower T-bills rates can easily be mitigated by safety of the principal (and return!) – something many businesses cannot boast of today. Put simply, why should business owners risk employing people and possibly make losses, when they can simply invest in Treasury bills? After all, they too are exposed to the same inflation rate. Unsurprisingly, this has contributed its own share in impeding growth of the country. Think about the percentage income of Nigerian financial institutions like banks that are from Treasury Bills. Conservatively, Nigerian PFA’s also have a significant percentage of their funds in Treasury bills – doing little and gaining little. It is always about the “cheapest to deliver.” No society can effectively spur development with only safe investments, as riskier investments come with benefits like creating more jobs, building the stock market, and ultimately strengthening industries in the country. 2. ‘MODEL’ ECONOMIES HAVE VERY LOW RISK-FREE INTEREST RATES Some of the largest economies like the US, Japan, and Germany are known to have some of the lowest rates for risk-free assets. Whilst their rates cannot also be isolated from their equally low borrowing costs, the facts are crystal clear. From a demand and supply standpoint, at 15%, it means what the government is willing to pay to get capital is high. This makes it even more expensive for government to fund infrastructural development. From a private sector standpoint, it is by taking risks that angel investors emerge, companies get seed funding, and further development is enhanced. Without this development, very few jobs will be created. Interestingly, most of the countries with the highest amount of venture capitalist investments also have some of the lowest rates for risk-free assets. 3. HOW INVESTMENTS SHOULD BE DONE There is an old investment strategy known as “Carry Trade.” The way it works is simple – borrow at a low interest rate, convert the borrowed sum into another currency, and invest in assets that provide higher rates of return in that currency. If Treasury Bills offer such high rates, “foreign investments” of this nature will not aid overall development of the economy. As long as the exchange rate is stable, investors get to make a killing with no value-added. This is just one of the many lapses of investing in risk-free assets. With T-bills rates low, people can now invest the way it should be done. Investors will now be forced to be creative. Consequently, this will birth even further infrastructural developments. For example, with this rate sustained, mortgage-backed securities and other forms of infrastructural funding can now take place. Though not without its own limitations, keeping the free money low is always a better option! SOURCE (abridged): https://nairametrics.com/2020/10/26/why-treasury-bills-at-2-is-actually-a-good-thing/ 1 Like |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by setobaba: 3:31pm On Oct 27, 2020 |
How can I buy treasury bill?? Do I need to walk in to any bank to buy it ? Do I need any document in place or have to be a government worker to buy? I knew nothing about the calculations of formulae to decided my gain, would you advice me to start with a million, if I decide to try?? Thanks |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by jamace(m): 5:00pm On Oct 27, 2020 |
setobaba: Meanwhile, get knowledge here; https://www.nairaland.com/878880/treasury-bills-nigeria |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by setobaba: 8:23pm On Oct 27, 2020 |
jamace:Base on your experience, if I start with 500k what would i likely have back in 6months with the rate or percentage you said up there. Thanks |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by jamace(m): 6:29am On Oct 28, 2020 |
setobaba:If rate is 2% per annum, you will receive N5,000 interest on your N500,000 in 6 months....Very discouraging, isn't it? |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by setobaba: 6:33am On Oct 28, 2020 |
jamace:Are you serious or joking ?? |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by jamace(m): 6:37am On Oct 28, 2020 |
setobaba:Use Simple interest formula to calculate it and see... |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by setobaba: 6:47am On Oct 28, 2020 |
jamace:I can only come to a conclusion this is a business for the wealthy not for us thanks |
Re: Why Nigerian Treasury Bills At 2% Is Actually A Good Thing by jamace(m): 6:57am On Oct 28, 2020 |
setobaba: Yes and No....Depends on your urgency for huge profit.. |
(1) (Reply)
Safemoon Coins Grew 100% In 24 Hours / How To Buy Bitcoin With Nigeria Naira / Beginner’s Guide To Life Insurance In Nigeria
(Go Up)
Sections: politics (1) business autos (1) jobs (1) career education (1) romance computers phones travel sports fashion health religion celebs tv-movies music-radio literature webmasters programming techmarket Links: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Nairaland - Copyright © 2005 - 2024 Oluwaseun Osewa. All rights reserved. See How To Advertise. 25 |