# Tutorial: How to calculate treasury bills in Nigeria

Contents

This post gives you the best information and tutorial on how to calculate treasury bills in Nigeria with examples.

Tbills is one of the best financial investment one can investment in Nigeria today.

But the question people always ask,

How to calculate treasury bills in Nigeria?

Also to know their return on investment.

Calculating treasury bills isn’t a difficult one, though one can get confused with the calculation.

However, if you’re planning on investing in the Nigeria treasury bills, your financial institution will definitely help you with the calculations.

But if you want to do the calculations by yourself, this post will guide you through on how to calculate treasury bills in Nigeria.

## How to calculate treasury bills rates in Nigeria

Before going into the T-bills calculation, you should know that there are three tenors in the treasury bills.

They are; 91 days and which is  three months, 182 days and which is six months and finally 364 days and which is one year respectively.

The rates varies from the primary market to the secondary market. You can get up to 10% rate in the primary market, whilst the secondary market can only offer up to 7%.

How are treasury bills calculated?

How to calculate treasury bills in Nigeria with examples?

We’ll be doing that using the three tenors in the T-bills; 91 days, 182 days and 364 days respectively.

Example 1

ABC wants to know his return on investment (roi) if he invested N500,000 into the treasury bills for 91 days, which the interest rate offered to him is 10%.

How to calculate treasury bills in Nigeria with examples.

The Calculation

The principal amount is N500k

The interest offered to him is 10%

Tenor he is investing is 91 days which is three months

We first have to get ten percent of five hundred thousand.

500,000 x 10 ÷ 100 = 50,000

Since ABC company is investing for 91 days or three months, we’ll have to divide the fifty thousand naira into four.

Reason is four quarter makes one year. If you times three months by four, it gives you twelve months and which is one year.

So one quarter is 1/4 x 50000

Here we’ll have to divide 50,000 by four and that gives us 12500.

So N12,500 is the return on investment (ROI) ABC will receive if he invest N500,000 in the treasury bills for three months and at the rate of 10%

This is the first method on how to calculate treasury bills in Nigeria using the least tenor, which is 91 days.

How to calculate treasury bills in Nigeria with examples.

Example 2

ABC decides to invest his N500,000 into the treasury bills for 182 days which is six months, and at the given interest rate of 10%

Thr difference between example one and two is the tenor, the first is 91 days (three months), while this example is 182 days (six months).

The Calculation

The principal is N500k

Tenor is 182 days which is six months

Interest rate is 10% per annum

We first have to get ten percent of five hundred thousand.

500,000 x 10 ÷ 100 = 50,000

This time ABC company is investing for six months, we’ll have to divide fifty thousand naira by two.

Reason for the two is because if you multiply six by two, it gives you twelve months and which is one year.

1/2 x 50000

On this, we’ll divide 50000 by two, and it gives us 25000 respectively.

So if ABC company invest in treasury bills in Nigeria with the sum of five hundred thousand naira for six months, and at the interest rate of 10%.

At maturity, ABC company return on investment is twenty five thousand naira.

This is the second method on how to calculate treasury bills in Nigeria.

Example 3

ABC company then decides to invest their N500k for 364 days which is one year, and still at the rate of 10%.

How to calculate treasury bills in Nigeria with examples.

The Calculation

The principal is N500k

Tenor is 364 days and which is one year

Interest rate offered still 10%

Judr like the two examples above, we first get the percentage of five hundred thousand and that’s fifty thousand.

500,000 x 10 ÷ 100 = 50,000

Here, ABC company is investing for 364 days which is one full year. In this case, there’s nothing like dividing by four or two, but rather one.

So it will be 1/1 x 50000

Fifty thousand divided by one is still fifty thousand.

So ABC company returns on investment for one year is fifty thousand naira (N50,000) for investing N500k at the rate of 10%.

This is the third method on how to calculate treasury bills in Nigeria.

Looking at the three examples, you’ll see that the longer the tenor or duration, the higher the amount on returns on investment.

Also the higher the amount you invested in treasury bills in Nigeria, the higher the returns on investment you will receive at maturity.

How to calculate treasury bills in Nigeria with examples.

Example 4

The fourth example is if ABC company invest one million naira into treasury bills for 91 days, 182 days and 364 days, with interest rate of 10%, what will be the return on investment.

The Calculation

Again we say percentage of one million naira is

1,000,000 x 10 ÷ 100 = 100,000

For 91 days

Like i said before, 91 days is three months. If you multiple three months by four, that will be one year.

And for us to get the return on investment for 91 days, we have to divide the amount gotten from the percentage on interest by four.

So that will be 1/4 x 100000 = 25000

This now means that the return on investment if ABC company invest in the treasury bills with one million naira, and for 91 days with the interest rate of 10% will be N25000.

For 182 days

182 days in a calendar year is six months, and if you multiply six months by 2, that will be twelve months and which is one year.

To calculate ABC company return on investment at maturity, it will be 1/2 x 100000 = 50000

So ABC company will get fifty thousand naira as their return on investment for one million naira fixed invested in the treasury bills for six months, and at the rate of 10%.

For 364 days

364 days is equivalent to saying one year and which is the maximum tenor you can invest in the treasury bills in Nigeria.

How to calculate treasury bills in Nigeria with examples.

So to calculate the ROI of ABC company at the end of the investment, we will have to divide the amount gotten from percentage on interest by one.

So it will be 1/1 x 100000 = 100,000

At the end of the investment, ABC company will receive one hundred thousand naira as their return on investment (ROI) for investing one million naira for one year, at the rate of 10%.

If you care to take a closer look at the examples above, you’ll see that it you multiply the returns on investment for example one, two and three by two, it gives you the returns on investment for example four.

Again this shows that the higher the amount invested in the treasury bills in Nigeria, the higher the returns on investment you will receive at maturity.

The longer the tenor, the higher the returns on investment as well.

This is why i do recommend that you invest for a longer period than just one month, two or three months.

Lastly, the higher the interest rate offered to you, the higher the amount you’ll receive at the end of the investment.

I know that some of you might be disappointed at what the return on investment is.

For example investing one million naira for one full year only gives you one hundred thousand at maturity.

Mind you please this is just an example, though the recent treasury bills rates were awful that i didn’t bother to think twice about it.

How to calculate treasury bills in Nigeria.

That’s why interest rate matters a lot in financial investment.

If the rates are low, you may not see the need to invest having seen the given interest rates.

However, instead of just leaving your money in a savings account for one year without touching it, it is better to invest the amount and get some amount of interest from it.

With this, i’ve answered your question on how are treasury bills calculated or How to calculate treasury bills in Nigeria with examples.

### T-bill price calculation formula

For those requesting T-bills price calculation formular, use the below formula for your calculations.

which I = P × T × R/100

I = Interest

P = Principal

T = Time/Tenor/Duration

R = Rate

The above formula helps you on how how to calculate treasury bills in Nigeria.

I’ve talked about how T-bills works in Nigeria, how to buy T-bills in Nigeria and their rates.

For the newbie, treasury bills are short term investment securities issued by governments to finance national borrowing requirements.

The three tenors are 91 days, 182 days and 364 days respectively.

There are two types of market in T-bills, one is the primary market and the other is the secondary market.

The primary market is only made up of the central bank of Nigeria, which issues treasury bills on behalf of the Federal Government of Nigeria.

T-bills are auctioned biweekly, which is every two weeks on Wednesday.

The minimum amount to buy T-bills through the primary market is fifty million naira, and investors must do that through their respective stock brokers.

An investor have to submit a bid, and it can be accepted or rejected and this depends on the average interest rate the federal government through the central bank is willing to offer to investors.

Buying from the secondary market is relatively affordable, though the price varies from financial institution to another.

However, the common minimum amount is one hundred thousand, though some accepts fifty thousand naira.

You can read more about T-bills and how it works by going through this post which is a detailed guide on T-bills in Nigeria.