Introduction

I once had a long talk with an old friend, trying to catch up on what he has been up to and we started talking about the stock market, the economy and other related matters. He told me how he was able to grow some cash deposits made by his uncle in his bank over the years in spite of all the economic downturn.  At the time when he received the cash deposits, he was just a newly employed bank staff and needed the deposits to keep his job.  With his position at the bank and his burning passion to add value to the funds entrusted to him he was able to find ways of growing the funds considerably.

He went on to explain that his principle was simple, keep the funds only in safe investments, fixed deposit, NTB – I asked what he meant by NTB and he explained that NTB stands  for “Nigerian Treasury Bill”. It is one of the monetary measures employed by the Central Bank of Nigeria to reduce the cash in circulation thereby controlling inflation. They idea is that the CBN decides to pay an attractive interest to banks if they bring some of the cash they have with them.

Shocker:  90% of the Bank marketing staff don’t really understand what this NTB is about. I spoke to a couple of bankers in a few banks to verify my friend’s story and most of them promised to get back to me with details. I never heard from any of them. I keep wondering why this information is not publicized by the banks

How it works
Commercial banks bid monthly for the NTB and at the close of bids, the rate becomes fixed for the period. NTB can be 91days, 182days of 364days. The details are usually published on the CBN website. Http://www.cenbank.org/rates/GovtSecurities.asp . The interest rate was as high as 14% last year.

Why it is interesting
The investment is so secure – you are guaranteed payment by the Central bank of Nigeria. Your interest is even paid upfront once the biding has closed. The current interest rate for a 91day NTB is 10.3%. Let me illustrate, one of my friends kept N1,300,000.00 in a fixed deposit account at 7% for 2 months and the return was NGN13,000. An NTB investment of N300,000 for 91days (3 months) at 10.3% returned about N7,600. Supposing it was N1,300,000 for 3 months, the returns would be N33,383.00.

How it is calculated
The Principal amount (amount you want to invest) multiplied by the interest rate (already divided by 100). The figure you get is divided by 365 (number of days in a year - since the rate is an annual rate) to get the return per day. This return per day is now multiplied by the number of days i.e. 91 days, 182 days etc. The bank charges are about 0.001%.

How you can be part of it
This investment is available to individuals starting with a minimum of NGN100,000.00. To be a part of it, make sure you have at least NGN100,000.00 in your account, write a letter to the bank manager of your bank requesting that your funds be used for the NTB you want. Don’t forget to include your account details. Since bidding is done towards the end of the month or beginning of a new month, submit your letter within that period.

A word of Caution
Don’t just submit your letter and wait, followup with the branch to ensure they don’t miss the due date. Also, you may want to use a savings account for it. Using a current account will incure Charge on Transaction (COT).  Also this investment is really for cash that you don’t want lying around in your account and at the same time, you don’t want to touch or invest it in riskier ventures. The returns are much better than a fixed deposit account except that if you decide to call back your money before your due date, the charges are will knock off any or most of the gains you may have made.

Lets Speculate a little
I believe Banks, Insurance companies, pension fund administrators, microfinance banks, mobile money agents etc use this investment regularly. Now I understand why they just want your money no matter the amount.  Just imagine 10.3% of 25billion ….. I think I have to operate my own bank in the near future.

Conclusion
I know there are a lot of people with cash just lying there in their bank accounts that are looking for safe and guaranteed investments. NTB will answer your prayers in the short run. For more information, contact the bank closest to you – insist on talking to people in their investment arm if the customer service people don’t get it.
Keep in touch with us, join The Business Man on facebook at http://www.facebook.com/DaBusMan