You might have heard of Treasury bills probably more than what you know about it, if at all. Despite the high demand for them, a lot of people do not really have a good understanding of what Treasury bills actually are.
Don’t worry, it isn’t late to know about one of the popular yet secured ways to invest your money. I will provide you with information on what T-bill is, the types of T-bill on the money market in Ghana, how to buy T-bill and why you should even buy it at all.
What is Treasury Bill?
Treasury bill (called T-bill for short) is a short-term financial instrument issued by the Bank of Ghana, either on its own account or on behalf of the Government of Ghana.
Government issues T-bills to raise funds from the general public for developmental projects.
So take it like when you buy T-bill, you are actually giving it as a loan to government at the T-bill interest rate. In Ghana, T-bill has a period between 91 – 365days.
It is risk–free and among the safest of investments, since it is backed by the government (maybe unless government collapses). But compared to other forms of investments such as stocks, returns on your T-bill holding could be relatively low in the long term.
What are the types of Treasury bills/bonds in Ghana?
Below are the various T-bills or bonds listed on the Ghanaian money market;
- 91-day Treasury bill
- 182-day Treasury bill
- 1 and 2-year Treasury Notes
- 3 and 5-year Bonds
You can check for the latest discounted and interest rates for each security on the Bank of Ghana website. Now, let’s talk about how you can buy treasury bills in Ghana.
How do I buy Treasury bills in Ghana?
First of all, you must know that only financial institutions which are permitted by Bank of Ghana and licensed by Security and Exchange Commission can sell T-bills.
Most of these financial institutions offer T-bills to the public at varying minimum purchases, usually around Gh 100 to Gh 300.
For instance, Cal bank offers a minimum of Gh100 purchase of T-Bill (as shown on its website) whiles Databanks’ starts from Gh500. Ecobank Ghana offers the “Ecobank TBILL4ALL” product, which according to their website, is slightly different from the traditional T-bill.
Always keep an eye on the prevailing treasury bill rates in Ghana before making a buy.
The buy and sell of treasury bills is opened to all Ghanaian citizens, institutions and foreign residents in Ghana and abroad.
By law, you must be at least 18 years to trade T-bills. However, you can buy T-Bills for a minor and hold it in trust for him or her. It can also be held in trust for family members, friends or organizations.
Can I cash out my T-bills before maturity?
Yes, you actually have three options. You will have the option to have your principal and interest deposited in your account at maturity; have the interest deposited in your account and the principal rolled over (re-invested in T-bills); or have the interest added to your principal and the total rolled over.
Many financial institutions offer you the opportunity to redeem your investment before maturity.
So inquire before buying, in case you may need to withdraw money for an emergency before maturity.
Why should I buy Treasury bills?
There are many good reasons why you should choose T-bill for your short term investment plans. If you feel like helping government of Ghana in its economic recovery, you can buy T-bill as a loan to government.
This is just my solemn thought, thou. Now, you may look at the following reasons why you may want to buy T-bills;
- You can easily buy, sell or discount your T-bill holdings.
- T-bills are safe and risk free as it is backed by government.
- No fees. You are usually not charged investment fees when you buy T-bills.
- You can easily convert T-bills to cash compared to investing in stocks.
- No taxes. Returns on your T-bills are not taxed in Ghana
- You can use your Treasury bills holdings as a collateral for a bank loan.
- With T-bill, you earn a fixed rate of interest.
- Your T-bill statements can be used to boost visa application process.
Summing up, T-bills are a safer and ideal investment for the short term, at least when you don’t have any other better short-term investment offers.
So you can contact any registered financial institution and ask more about the treasury bills they offer. You may need a national identification card or document to complete the application process.
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