You know that feeling when you lend someone money and you know that they are guaranteed to pay back and on time too? That peace of mind that you get and willingness to lend to that person again? That’s kind of what today’s blog is about.
Believe it or not, the Federal Government of Nigeria can actually be the ideal lender described above and if you can receive an alert from the Central Bank of Nigeria if you lend the government money. Wait, let me explain.
I know just how incredulous it sounds that I’m asking you to lend the government money. “What does the government need money for?” you may be thinking. Well, the government may be rich (we’ll never know) but it doesn’t always have a steady flow of tax and revenue to fund all of its expenditure. So sometimes, the government sources funds, through the things I’ll tell you about next, to fund it’s short-term liquidity needs.
In other words, when you lend the government money through things like treasury bills, the CBN directly credits your account at the time of repayment. Here are the two ways you can get a credit alert from the CBN:
- FGN Savings Bond: This bond was introduced to help build a savings culture among Nigerians, regardless of age or economic status, whilst also contributing to national development (since you’re lending the government to do things like build roads). You can do some research into how it works precisely but we can tell you for free that if you hold this type of bond, you will enjoy coupon/interest on a quarterly basis (every 3 months) which will be paid directly into your bank account. For example, if you have N1 million to invest for the 2-year savings bond at an interest rate of 12.745%, you will be credited with the sum of N32,124.28 by 5th September, 2019, and so on.
- Nigerian Treasury Bills: This is a government-only short-term borrowing instrument sold at a discount and redeemed at original value. The government uses it to fund short-term budget deficits. Here’s an example: if you purchase a N1 million T-bill maturing 15-Feb-2020 with an interest rate of 10%, the CBN will debit N900,000 from your account and credit your account with N1,000,000 at the maturity date. Treasury bills are usually for 91, 182 and 364 days when newly issued, but the days to maturity can be different if you buy from the secondary market (i.e other people that want to sell).
So, while these may not have huge returns on them, the returns are guaranteed and if you are a long-term saver, this will be perfect for you. What are you still waiting for? Start researching and get the CBN to credit your account!
As always, when you win, we win. To the moon!