Risk Free Investments: Fixed Deposits vs Nigerian Treasury Bills


There are safe and risk free ways to make extra cash from that money sitting in your bank account. Fixed deposits (FD) and Nigerian treasury bills (NTBs) are two good options to consider.

While the banks are trying to reduce the interests customers are supposed to earn using savings account with every possible medium by deducting for almost any account activity like email alerts, sms alerts, atm withdrawal, account maintenance and many more. You can opt into FD or NTBs and get a higher return over three times the interest that a regular savings account would give you if only you can keep the money intact in your account for a minimum of 90 days(3months) for NTBs or 30 days(1month) for FD.

Find details of Fixed Deposits and Nigerian Treasury Bills below if you decide to go for either of them.

 

FIXED DEPOSITS

Fixed deposits are shot term investments, usually for a 30, 60, 90, 180, or 365 day period.

Facts & Features of Fixed Deposits:

  • Interest on fixed deposits are subject to 10% withholding tax which is credited to the government.
  • In most Banks, if you are terminating the investment before maturity, on your accrued interest, a 20% penal charge is applied.
  • The bigger the amount and the longer the investment period should most likely earn one a more juicy rate, but irrespective of that, in most banks, 99% of the time, the banker you are interfacing with will never offer you the highest interest rate. Thus, your negotiating skill & ability matters, as well as your willingness to move your money to the next bank.
  • Unlike NTBs interest which is paid upfront, interest on fixed deposit are paid only at maturity.
  • In most banks, you can start fixed deposit investment with N100,000. In some other banks, it is lower.
  • While filling the fixes deposit request form, at maturity, you can chose to rollover principal  only, rollover principal + interest or have both principal + interest credited back to your account.
  • Fixed deposit investment are risk free investment.
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NIGERIAN TREASURY BILLS (NTBs)

Nigerian Treasury Bills are also short term investment but in government instruments. They are usually placed for either a 91 day period, 182 days or 364 days.

Facts & Features of NTBs

  •  Interest rates on NTBs are always higher than what any Bank would offer you on Fixed Deposit. Especially your NTBs investment is for a 364 day period.
  • Your negotiating skill is not needed as the determined rate on the auction date between the concerned parties (the CBN, Commercial Banks, investment houses, etc) applies to everyone’s investment irrespective of the bank or investment house through which the investment was placed. Thus, if on the auction date the bills for 91 days are offered at 12% per annum, across all banks & investment houses, 12 will apply.
  • Interest is paid up-front. For instance if you are investing #100,000 @ 12 per annum for 91 days, the interest figure, in this case which is about  #2,991.78 will be credited to you immediately while only your principal will be returned at maturity.
  • NTBs interest is subject to N100 as handling charge & 0.25% commission both in favour of the processing bank or investment house.
  • While placing the investment, one can choose to rollover both principal + interest, principal only or have the principal returned to his/ her account at maturity.
  • One who wishes to terminate at maturity can also do so through the bank or the investment house where the investment was placed. The process is not hitch free and can be time consuming.
  • NTBs investments are absolutely risk free investments, and are the best forms of investment recommended for those who are risk conscious.
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credit: Nairabanks

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1 Comment

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  1. Adebayo Abimbola Sidikat

    Tanx so much for this information, it really worth reading.

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