Treasury bills are short-term loans that the government takes to finance various operations. In Ghana, the maturity of treasury bills is 91 days and 182 days, each offering a different yield. Since treasury bills are guaranteed by the government, they are considered a risk-free investment and therefore are generally used as a benchmark to determine the value of any investment. If an investment gives you lower returns than a T-bill, you probably wouldn’t want to invest in it.
Our expert, Jerome Kuseh, explained that treasury bills are determined when the government issues treasury bills through auctions. The auctions are not open to the general public. They are only available for primary dealers. These are financial institutions authorized by the Bank of Ghana (BoG) and licensed by the Securities and Exchange Commission (SEC) to purchase government securities issued by the BoG.
Most financial institutions offer treasury bills to the general public with minimum purchases of around GH ¢ 100 or GH ¢ 200. You can choose to buy it for 91 days or 182 days, with the 182 day version having a higher interest rate due to the longer maturity period. You will be able to have your principal and interest deposited into your account at maturity; deposit the interest in your account and defer the capital (reinvested in treasury bills); or have the interest added to your principal and carry forward the total. Many financial institutions offer you the option of redeeming your investment before maturity. Make sure you educate yourself about this before you buy, in case you need to withdraw cash in an emergency.
- No risk of losing your investment (as long as the government doesn’t collapse).
- It’s liquid, meaning it’s usually easy to pay off your investment whenever you need it.
- No charges. You generally don’t pay an investment fee when you buy treasury bills.
- No taxes. Returns on your treasury bills are not taxed in Ghana.
- Easy to buy. Your bank probably offers it.
- Low volatility. Treasury bill rates rise and fall less sharply than other investments, such as stocks.
- Relatively low returns. It’s risk free, so don’t expect to reap exceptional returns from it.
- Returns are not fixed. Since the rates are determined by auctions, you can roll over your treasury bill at a lower or higher rate than your original purchase.
- This makes borrowing costs high for businesses. Ghana’s Treasury bill rates are generally high, prompting banks to invest in them to the detriment of businesses looking for credit.