Welcome, Guest: Register On Nairaland / LOGIN! / Trending / Recent / New
Stats: 3,151,834 members, 7,813,786 topics. Date: Tuesday, 30 April 2024 at 06:22 PM

Leave My N10m In My Savings Account Or Invest It In Treasury Bill? - Investment - Nairaland

Nairaland Forum / Nairaland / General / Investment / Leave My N10m In My Savings Account Or Invest It In Treasury Bill? (2157 Views)

How Can I Invest In Treasury Bills / 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)

(1) (Reply) (Go Down)

Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Nobody: 1:58am On Mar 09, 2019
CASE STUDY:

This is for the potential investors wish to understand the benefits of investing in Treasury bill(Tbill) as opposed to leaving their money in the savings account; and also to show you how Tbill investment differs from the money left sitting in your bank account. Below is a practical example.

N10m IN YOUR SAVINGS ACCOUNT:
I have N10m(principle) to invest. If I leave the money in my GTB savings account(which I used to do), GTB would apply 0.3% to my N10m to determine my monthly gain,ROI, interest earned or interest capitalised. So, 0.3% of N10m = N30K monthly....N30K x 12 months = N360K yearly. As long as your principle and interest rate from GTB remain constant for the year, you'll receive N360K from GTB on top of your N10m. Therefore, your income statement on Jan. 1 will show that you're worth N10,360,000

N10m IN TREASURY BILL:
We all remember the formula for simple interest, right? Simple interest(I) = Principle(p)xRate(R)xTime(T) OR I= P × R/100 ×T/364
Tenure options: 91 days, 182 days and 364 days. Assumed Rate and principle are 14% and N10m, respectively.

91 DAYS: I= N10m × 14/100 ×91/364, your automatic interest(ROI) = N350K(if you choose 3 Months)

182 DAYS: I= N10m × 14/100 ×182/364, your automatic interest(ROI) = N700K(if you choose 6 months)

364 DAYS: I= N10m × 14/100 ×364/364, your automatic interest(ROI) = N1,400,000(if you choose 1 year)

From above, your ROI from Tbill in 3 months is almost the same as your ROI from your savings account in 12 months. In fact, your ROI will be higher if interest rate from Tbill is greater than 14%.

BOTTOM LINE: Would you rather leave your N10m [/b]in the savings account for [b]ONE YEAR and make extra N360K OR Invest your N10m in
Tbill for ONE YEAR and make extra [b]N1,400,000 [/b]on top of your invested capital? The choice is yours...

PLS NOTE: Consider principle and interest rate used above as random numbers, however calculations are 99.9% accurate. You may verify!

1 Like 2 Shares

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by mejai(m): 2:07am On Mar 09, 2019
T-bag straight. If I were you
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by bigtt76(f): 3:20am On Mar 09, 2019
TBills are restricted to 50 mliion and above best bet is money market funds or investing in TBills at the secondary market and a much lower rate undecided
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by flyingdutchman(m): 4:45am On Mar 09, 2019
bigtt76:
TBills are restricted to 50 mliion and above best bet is money market funds or investing in TBills at the secondary market and a much lower rate undecided

Nah nah nah!!! Not true. Check your facts tittie!

2 Likes

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Yazmin: 7:46am On Mar 09, 2019
Hello,

There is no doubting the fact that T Bills are be eternal investment securities with higher returns than most other money market instruments available in the Nigerian Financial system.

However,your calculations and assumptions are quite innacurate and may not potray the exact analysis for practical purposes.

As a guide, T Bills can be done from as low as N500,000 & not N50mm as quoted by a commenter. However certain investment buckets in the T bills market have a minimum of such (where you wish to determine or bid your own rate as aginst that to be set by the CBN during sales).

For savings accounts, interest is compounded monthly and not in simple interest format. You invest N10mm principal, in month one. By month 2 your Total amount becomes N10mm plus N30k interest.
Therefore when calculating the interest for month 2, you no longer use N10mm but N10,030,000 as principal and incrementally so on till month 12.

You should be receiving some few thousand above your straight line calculation of N30k monthly time 12 months.

Also , T bills rate are guided by the MPR (Monetary Policy rate , which Is at 14% today). The are always lower than this rate, once they are issued by the CBN. T Bills are priced based on Tenors rather than amounts. So the interest rate for a 91 days differs from that of a 182 and 364 days (The lower the tenors, the lower the rates).

Also, unlike T Bills, Savings deposits could be negotiated (on a fixed term) & these rate could sometimes rival T bills in some banks, depending on the liquidity appetite for such banks at the time of your proposed investment.

T Bills have an advantage of having no WHT (Witholding Tax) payments, so you get your full interest, tax free, except for some few fees of less than N1,000 charged for transfer and monitoring.

In all, I'd go for a T Bill for higher returns, longer tem investment purpose and funds security. But a fixed deposit for shorter periods and if the funds needs to show on my account statements for related purposes.

Pradon my spelling/grammatical error. was typing in a rush in order to catch a space on the queue to go and vote Ganduje (Gandollars)in Kano this morning.

Shallom...& vote wisely!!!

14 Likes 8 Shares

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by waka2: 10:32am On Mar 09, 2019
@yazmin,thanks for this,once in for the fixed deposit, is it possible for anything to change the expected income like stock that is not stable or is it fixed?
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by meobizy(f): 11:45am On Mar 09, 2019
Putting money in a bank account where it doesn’t make returns is the worst action anyone can take.
The Treasury Bill idea is the best.
At least small money will trickle into your account from time to time.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by ChineduObinna(m): 12:19pm On Mar 09, 2019
flyingdutchman:


Nah nah nah!!! Not true. Check your facts tittie!

He is correct, since 2017 bubu and him people have restricted it to ₦50m, but you can join a pool at your bank or investment firm and bid.

1 Like

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by ChineduObinna(m): 12:27pm On Mar 09, 2019
Yazmin:
Hello,

There is no doubting the fact that T Bills are be eternal investment securities with higher returns than most other money market instruments available in the Nigerian Financial system.

However,your calculations and assumptions are quite innacurate and may not potray the exact analysis for practical purposes.

As a guide, T Bills can be done from as low as N500,000 & not N50mm as quoted by a commenter. However certain investment buckets in the T bills market have a minimum of such (where you wish to determine or bid your own rate as aginst that to be set by the CBN during sales).

For savings accounts, interest is compounded monthly and not in simple interest format. You invest N10mm principal, in month one. By month 2 your Total amount becomes N10mm plus N30k interest.
Therefore when calculating the interest for month 2, you no longer use N10mm but N10,030,000 as principal and incrementally so on till month 12.

You should be receiving some few thousand above your straight line calculation of N30k monthly time 12 months.

Also , T bills rate are guided by the MPR (Monetary Policy rate , which Is at 14% today). The are always lower than this rate, once they are issued by the CBN. T Bills are priced based on Tenors rather than amounts. So the interest rate for a 91 days differs from that of a 182 and 364 days (The lower the tenors, the lower the rates).

Also, unlike T Bills, Savings deposits could be negotiated (on a fixed term) & these rate could sometimes rival T bills in some banks, depending on the liquidity appetite for such banks at the time of your proposed investment.

T Bills have an advantage of having no WHT (Witholding Tax) payments, so you get your full interest, tax free, except for some few fees of less than N1,000 charged for transfer and monitoring.

In all, I'd go for a T Bill for higher returns, longer tem investment purpose and funds security. But a fixed deposit for shorter periods and if the funds needs to show on my account statements for related purposes.

Pradon my spelling/grammatical error. was typing in a rush in order to catch a space on the queue to go and vote Ganduje (Gandollars)in Kano this morning.

Shallom...& vote wisely!!!

The form you fill from CBN for a bid , cannot, accept <₦50m.
But you can invest less than ₦50m in TB by using banks that have pools(all banks have one) the down side is that if say CBN offers 16% at the end of the tenure, the pool may get 10% from their bank, or broker

1 Like 1 Share

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by bigtt76(f): 1:12pm On Mar 09, 2019
It is a fact since 2017 see here https://nairametrics.com/2019/01/15/this-is-how-to-bid-for-the-second-treasury-bills-sale-of-2019/ you can only participate through the secondary market - banks, stock brokers and discount houses who pool together funds to participate at the primary market.


flyingdutchman:


Nah nah nah!!! Not true. Check your facts tittie!
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by bigtt76(f): 1:14pm On Mar 09, 2019
Exactly and that's why you now have all the likes of PiggyVest etc mopping up loose cash through the use of Technology platforms.



ChineduObinna:


The form you fill from CBN for a bid , cannot, accept <₦50m.
But you can invest less than ₦50m in TB by using banks that have pools(all banks have one) the down side is that if say CBN offers 16% at the end of the tenure, the pool may get 10% from their bank, or broker

1 Like

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by flyingdutchman(m): 1:46pm On Mar 09, 2019
ChineduObinna:

Nigeria has gone to the dogs!
He is correct, since 2017 bubu and him people have restricted it to ₦50m, but you can join a pool at your bank or investment firm and bid.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Yazmin: 2:59pm On Mar 09, 2019
ChineduObinna:


The form you fill from CBN for a bid , cannot, accept <₦50m.
But you can invest less than ₦50m in TB by using banks that have pools(all banks have one) the down side is that if say CBN offers 16% at the end of the tenure, the pool may get 10% from their bank, or broker
.

To some extent, you are right. However, What you have stated is what occurs between the banks and the regulator (CBN) , which is another ball game altogether.

The OP asked of either leaving it in his savings account or investing in Tbills. which shows he is an individual , not a bank and thus, my response was tailored in similar direction.

Again, for clarity, individual bank account holders can request for personalised rates and hence , the CBN minimum threshold of N50million naira for such type of request. The interest rate would be that as given by CBN directly with no 'DMB' rate pool effect.

Shallom.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Chriswazo(m): 6:30pm On Mar 09, 2019
Can an investment in Tbil be lost? What's the security rating?
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Nobody: 8:11pm On Mar 09, 2019
@Yazmin, I do welcome your observation, but again I did state above that my calculation is valid if bank rate and your principle remain the same; i.e N10m for the whole year, hence you may divest or withdraw your N30K each month instead of it being compounded, and in the subsequent month 0.3% to same N10m. I could have shed more light on my write-up but didn't want it to be voluminous. Also, in case you didn't notice, I applied 14% to all tenures(91, 182, and 364 days, respectively)... my approach is practical not objective. In the real, same rate doesn't apply to all tenures... the purpose of my message is to encourage folks to invest in Tbill because of its long term benefits rather than let their money sit in the bank. All in all, I appreciate your contribution...we live to learn everyday!

Yazmin:
Hello,

There is no doubting the fact that T Bills are be eternal investment securities with higher returns than most other money market instruments available in the Nigerian Financial system.

However,your calculations and assumptions are quite innacurate and may not potray the exact analysis for practical purposes.

As a guide, T Bills can be done from as low as N500,000 & not N50mm as quoted by a commenter. However certain investment buckets in the T bills market have a minimum of such (where you wish to determine or bid your own rate as aginst that to be set by the CBN during sales).

For savings accounts, interest is compounded monthly and not in simple interest format. You invest N10mm principal, in month one. By month 2 your Total amount becomes N10mm plus N30k interest.
Therefore when calculating the interest for month 2, you no longer use N10mm but N10,030,000 as principal and incrementally so on till month 12.

You should be receiving some few thousand above your straight line calculation of N30k monthly time 12 months.

Also , T bills rate are guided by the MPR (Monetary Policy rate , which Is at 14% today). The are always lower than this rate, once they are issued by the CBN. T Bills are priced based on Tenors rather than amounts. So the interest rate for a 91 days differs from that of a 182 and 364 days (The lower the tenors, the lower the rates).

Also, unlike T Bills, Savings deposits could be negotiated (on a fixed term) & these rate could sometimes rival T bills in some banks, depending on the liquidity appetite for such banks at the time of your proposed investment.

T Bills have an advantage of having no WHT (Witholding Tax) payments, so you get your full interest, tax free, except for some few fees of less than N1,000 charged for transfer and monitoring.

In all, I'd go for a T Bill for higher returns, longer tem investment purpose and funds security. But a fixed deposit for shorter periods and if the funds needs to show on my account statements for related purposes.

Pradon my spelling/grammatical error. was typing in a rush in order to catch a space on the queue to go and vote Ganduje (Gandollars)in Kano this morning.

Shallom...& vote wisely!!!

3 Likes

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by clintino700(m): 6:32pm On Mar 10, 2019
TB is not restricted to 50m but from 500k or 1m.
In Jan I did TB with first bank #10m I was paid #1.42m for 365days. I took the money and invested in ARM mutual Funds i get more than #15k monthly. Is it more flexible and withdrawable at anytime.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by clintino700(m): 6:35pm On Mar 10, 2019
Chriswazo:
Can an investment in Tbil be lost? What's the security rating?
It can't, been doing it for over 2yrs plus is very transparent and safe. Just get a good rate.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Chriswazo(m): 3:38am On Mar 11, 2019
clintino700:

It can't, been doing it for over 2yrs plus is very transparent and safe. Just get a good rate.

Okay, thank you for answering. All I need do is just go to my bank and ask for what precisely, T-bill form or what?
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Chriswazo(m): 3:40am On Mar 11, 2019
clintino700:
TB is not restricted to 50m but from 500k or 1m.
In Jan I did TB with first bank #10m I was paid #1.42m for 365days. I took the money and invested in ARM mutual Funds i get more than #15k monthly. Is it more flexible and withdrawable at anytime.

How can I achieve this with my bank? Should I meet the customer care for that?
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by clintino700(m): 12:28pm On Mar 11, 2019
Chriswazo:


How can I achieve this with my bank? Should I meet the customer care for that?
Customer care can assist but don't you have an account manager. Let him guide n get a guarantee good rate.
Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Chriswazo(m): 12:47pm On Mar 11, 2019
clintino700:

Customer care can assist but don't you have an account manager. Let him guide n get a guarantee good rate.

Okay, will visit them to make enquiries, thank you.

1 Like

Re: Leave My N10m In My Savings Account Or Invest It In Treasury Bill? by Nobody: 7:50pm On Mar 14, 2019
The last two treasury bill transactions are really disappointing. I spoke with my account officer to find out why the rates have suddenly dropped from what they were in January of this year, he simply said 'over-subscription.' The greater the cash inflow, the more likely CBN will offer lower stop rate. Using 'buyers's Market' as an example in real estate, more available houses on the market means home-buyers enjoy bargaining power, and the seller is willing to sell for less than the asking price. CBN is the consumer in the case willing to offer less rate because too many people(many available homes) are subscribing. Many of us, if not all would prefer the seller's market where the reverse is the case... but let's not give up!

(1) (Reply)

Best Volatility Indices Strategy / Ksley Mega Micro Finance Bank Is Shaking / Breaking Good News! Something Big Is Coming From Us Soon Watch Out.

(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. 57
Disclaimer: Every Nairaland member is solely responsible for anything that he/she posts or uploads on Nairaland.