Difference Between Fixed Deposit and Treasury Bills

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Difference Between Fixed Deposit and Treasury Bills

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Treasury Bills

Treasury Bills on the other hand is also a short term financial investment but sold by the Central Bank of Nigeria. An investor in treasury bills lends money to the CBN for a stipulated period in exchange for interest. Treasury bills are usually for a period of 91days, 182 days and 364 days. Treasury Bills have the following Characteristics

  • Treasury Bills are sold bi-weekly or as determined by the CBN
  • The CBN puts a limit to the amount of treasury bills it wishes to sell
  • The CBN uses the funds from Treasury Bills to control money supply in the economy
  • Interest rates for treasury bills are determined by an auction and can vary from investor to investor, amount to amount and tenor to tenor
  • Interest on treasury bills are paid upfront
  • The CBN pays an investor in treasury bills upon maturity and does not roll-over
  • Treasury Bills can only be bought or resold at the Over The Counter Market (OTC)
  • An investor who can’t wait till maturity to cash out on the treasury bill can sell his investment at the OTC market
  • Treasury Bills are tax free
  • Treasury Bills  is not secured by any asset but are backed by the full faith and credit of the Nigerian Government
  • Treasury bills can be used as a collateral and is accepted by all banks