Exploring Opportunities, Mitigating Against Losses, Taking Decisive steps
Despite the seeming stability in the equity sector of the Nigerian Stock Exchange, which resulted in the upward movement of stocks indices in the early part of this year, other investment options are still open to investors which are yet to be explored. We shall be taking a look at one of such opportunities which is Treasury Bill Investment and Government Bonds.
Treasury Bills are very safe short-term investments issued by the Federal Government .These are referred to as GILT EDGE instruments in the financial industry because they are considered risk free instruments, which guarantees constant returns on investment and helps to mitigate against losses.
A lot of investors recorded major losses in the equities sector of the NSE between April and December 2008,before the market recovered early this year, but experts noted that treasury bills investment option could be used to mitigate the losses incurred on equities ,since returns on it is guaranteed.
Diversification of investment portfolio is necessary because in developing and even developed economies ,investors who put their eggs in a single basket got their fingers burnt recently during the global financial crises. Those who diversified their portfolios were able to weather the storm.
Government issue Treasury Bills in very large denominations ,Banks and investment dealers break these up and sell them to investors. Investors will always buy a treasury bill at a discount face value. That means they pay less than what they will get back when government investor t cashes it.
Treasury Bill are mostly offered in terms of one month to just under one year.
Investors’ profit it is stated as a percentages of their investment. In case, it would be about 2.56 per cent (25 on 975). Even though returns on treasury bills is a capital gain, the government treats the return as interest income, which is taxed at a rate.
Treasury bills are considered among the safest investment, especially when they have three months or less to maturity.
Should investors need their money before the treasure bills mature ,they can always sell them on the open market through an investment deal . The returns on treasury bills are generally lower than for longer term investments. But they are ideal investments when an investor cannot afford to risk his money . For an investor who believes that the stock market or bond markets is going to lumps, treasury bills can be a good place to park money for a short while. Big investor s with lots of cash on hand might prefer to invest in treasury bills rather than put the money in the bank. This is because bank account deposits are insured to a maximum of 100,000.
According to the Kakawa Discount House limited, a Nigerian company, treasury bill is an investment option that offers investors utmost security, as it is backed by the federal government of Nigeria treasury bills. ”it helps mitigate the re-discounting risk on treasury bill by offering shorter tenors than what obtains in the primary market (i.e call, 30 and 60 day tenors) this means that rather than buy 91 or 182 day treasury bills, we offer you shorter-tenured bills “The company said.
It is backed by the Federal government of Nigeria and there is no better secured instrument in the country.
It is liquid because you can terminate your investment on call from seven days onwards; Minimum amount of N1million investment is required; and your investment can be used as collateral for borrowing; and Kakawa(in Nigeria) can give an undertaken to that effect.
Interest rate is determined by the CBN and discounted to the customer. Tenor; between 30-90 days with roll over option.
Alternatively in Nigeria, Kakawa can bid for a customer at CBN rate for physical bills (primary market), commission would be 1/8% of total bid value
A stock broker, who is also the managing director of GTI capital limited, a company which deals in treasury bills, Mr, Abubakar Lawal, said, “the benefits are enormous. It is risk free, stable and the procedure of investing is to place orders.
The benefits for small investors, according to another stockbroker, who is the managing director of Kinley securities limited, Mr, Bidun Okundalaiye, include, a guaranteed percentage of return, which does not in absolute terms dependent on market instability, Investment can also be for a short period.
To get the full proceedure, those interested will need to approach their stockbrokers, financial advisers or any stock broking firm for further advice .
cnich solutions
Despite the seeming stability in the equity sector of the Nigerian Stock Exchange, which resulted in the upward movement of stocks indices in the early part of this year, other investment options are still open to investors which are yet to be explored. We shall be taking a look at one of such opportunities which is Treasury Bill Investment and Government Bonds.
Treasury Bills are very safe short-term investments issued by the Federal Government .These are referred to as GILT EDGE instruments in the financial industry because they are considered risk free instruments, which guarantees constant returns on investment and helps to mitigate against losses.
A lot of investors recorded major losses in the equities sector of the NSE between April and December 2008,before the market recovered early this year, but experts noted that treasury bills investment option could be used to mitigate the losses incurred on equities ,since returns on it is guaranteed.
Diversification of investment portfolio is necessary because in developing and even developed economies ,investors who put their eggs in a single basket got their fingers burnt recently during the global financial crises. Those who diversified their portfolios were able to weather the storm.
Government issue Treasury Bills in very large denominations ,Banks and investment dealers break these up and sell them to investors. Investors will always buy a treasury bill at a discount face value. That means they pay less than what they will get back when government investor t cashes it.
Treasury Bill are mostly offered in terms of one month to just under one year.
Investors’ profit it is stated as a percentages of their investment. In case, it would be about 2.56 per cent (25 on 975). Even though returns on treasury bills is a capital gain, the government treats the return as interest income, which is taxed at a rate.
Treasury bills are considered among the safest investment, especially when they have three months or less to maturity.
Should investors need their money before the treasure bills mature ,they can always sell them on the open market through an investment deal . The returns on treasury bills are generally lower than for longer term investments. But they are ideal investments when an investor cannot afford to risk his money . For an investor who believes that the stock market or bond markets is going to lumps, treasury bills can be a good place to park money for a short while. Big investor s with lots of cash on hand might prefer to invest in treasury bills rather than put the money in the bank. This is because bank account deposits are insured to a maximum of 100,000.
According to the Kakawa Discount House limited, a Nigerian company, treasury bill is an investment option that offers investors utmost security, as it is backed by the federal government of Nigeria treasury bills. ”it helps mitigate the re-discounting risk on treasury bill by offering shorter tenors than what obtains in the primary market (i.e call, 30 and 60 day tenors) this means that rather than buy 91 or 182 day treasury bills, we offer you shorter-tenured bills “The company said.
It is backed by the Federal government of Nigeria and there is no better secured instrument in the country.
It is liquid because you can terminate your investment on call from seven days onwards; Minimum amount of N1million investment is required; and your investment can be used as collateral for borrowing; and Kakawa(in Nigeria) can give an undertaken to that effect.
Interest rate is determined by the CBN and discounted to the customer. Tenor; between 30-90 days with roll over option.
Alternatively in Nigeria, Kakawa can bid for a customer at CBN rate for physical bills (primary market), commission would be 1/8% of total bid value
A stock broker, who is also the managing director of GTI capital limited, a company which deals in treasury bills, Mr, Abubakar Lawal, said, “the benefits are enormous. It is risk free, stable and the procedure of investing is to place orders.
The benefits for small investors, according to another stockbroker, who is the managing director of Kinley securities limited, Mr, Bidun Okundalaiye, include, a guaranteed percentage of return, which does not in absolute terms dependent on market instability, Investment can also be for a short period.
To get the full proceedure, those interested will need to approach their stockbrokers, financial advisers or any stock broking firm for further advice .
cnich solutions
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