T-bill yield
True annualised return on a Nigerian Treasury bill. Buy at a discount (e.g. ₦950K for ₦1M face value), receive face at maturity. 364-day T-bills yielded 18-22% across 2025.
When you invest in a Nigerian Treasury bill, or T-bill, you're essentially lending money to the government for a short period. Imagine buying something at a discount; you pay less today but will receive the full amount at a later date. For instance, if you buy a T-bill worth ₦1 million at ₦950,000, you'll get back the full ₦1 million when it matures. The difference between what you pay and what you receive is your return on investment. Over a year, this return is annualized to show what you'd earn if you held the T-bill for a full year. In recent times, these returns have been quite attractive, with 364-day T-bills offering yields between 18% and 22% in 2025.
The Nigerian government issues T-bills to manage its short-term borrowing needs. These are typically seen as very safe investments because they are backed by the government. Investors, both small and large, often use T-bills as a way to park their money temporarily while still earning a decent return. For example, a small business owner might use T-bills to invest their excess cash for a few months until they need it for upcoming expenses. The ease of buying and selling T-bills also makes them a flexible investment option.
However, it's important to be aware of some deductions that affect your returns. When you sell your T-bill before it matures, you might owe a 10% withholding tax on the profit. Additionally, if you sell at a profit, you'll also pay a 10% capital gains tax on that profit. These taxes can eat into your overall returns, so it's wise to plan accordingly. For instance, if you bought a T-bill for ₦950,000 and sold it for ₦970,000 before maturity, you'd owe taxes on the ₦20,000 profit.
Understanding T-bill yields and the associated taxes can help you make informed investment decisions. Knowing how much you'll actually take home after taxes can guide you in choosing whether to hold the T-bill until maturity or sell it earlier. This knowledge is crucial for maximizing your returns and ensuring that your investment strategy aligns with your financial goals.
Why it matters: Grasping the true annualized return on T-bills and the impact of taxes helps you understand how much your money can grow over time. This knowledge is essential for Nigerian retail investors who want to make the most out of their investments, whether they're saving for a rainy day or planning for future expenses.