Many Ghanaians have heard that treasury bills are a safe place to put money. Bankers mention them. Financial advisors recommend them. News reports quote their rates. Yet for a lot of people, the actual mechanics remain unclear. What exactly is a treasury bill? How do you buy one? How do you earn money from it? And what are the risks?
This article explains treasury bills in plain language. It is written for the ordinary Ghanaian who wants to understand how lending money to the government works, why the rates move up and down, and whether treasury bills are a sensible option for their savings.
No financial product is perfect, and treasury bills are no exception. But understanding them clearly is the first step to making better decisions about your money.
Quick Facts
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A treasury bill is a short-term loan you make to the Government of Ghana.
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Treasury bills are issued by the Bank of Ghana on behalf of the Ministry of Finance.
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The most common maturities are 91 days, 182 days, and 364 days.
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You buy treasury bills at a discount and receive the full face value when the bill matures.
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Interest earned on treasury bills is currently tax-free for individual Ghanaian residents, but this status can change with government policy.
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The minimum investment amount has changed over time; check the current requirement from the Bank of Ghana or an approved dealer.
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Treasury bills are considered low-risk compared with most other investments because they are backed by the government, but they are not entirely risk-free.
What a Treasury Bill Is
A treasury bill, often called a T-bill, is a short-term debt instrument issued by the government. When you buy a treasury bill, you are lending money to the Government of Ghana for a fixed period. In return, the government promises to pay you back the full amount — called the face value — on a specific date in the future.
The word “short-term” matters. Treasury bills have maturities of one year or less. In Ghana, the standard maturities are 91 days, 182 days, and 364 days. This distinguishes them from treasury bonds, which have longer maturities, typically two years or more.
The government borrows money through treasury bills to manage its cash flow and finance short-term obligations. Governments rarely collect revenue exactly when they need to spend it. Treasury bills help bridge the gap.
How Treasury Bills Work
Treasury bills work differently from a regular savings account. When you put money in a savings account, the bank pays you interest on your balance. With a treasury bill, you do not receive periodic interest payments. Instead, you buy the bill at a discount and receive the full face value at maturity.
Here is a simple example using made-up figures for clarity:
Suppose a 364-day treasury bill has a face value of GH₵100,000. If the discount rate is 25%, you would pay around GH₵75,000 to buy the bill. At the end of the 364 days, the government pays you GH₵100,000. The difference — GH₵25,000 — is your interest or return.
In practice, the calculation is slightly more technical because the discount rate is annualised, and the exact price depends on the number of days in the bill’s tenor. But the principle is simple: you pay less than the face value now and receive the full face value later.
This structure means your return is known in advance. If you buy a bill and hold it until maturity, you know exactly how much you will receive and when.
Who Issues Treasury Bills in Ghana
The Bank of Ghana issues treasury bills on behalf of the Ministry of Finance. The Bank of Ghana acts as the government’s agent in the primary market, conducting auctions where treasury bills are sold to investors.
The Ministry of Finance determines how much the government needs to borrow and what mix of short-term and long-term instruments to use. The Bank of Ghana handles the mechanics of issuance and settlement.
Treasury bills are sold through primary dealers, which are approved banks and financial institutions. Individual investors cannot buy directly from the Bank of Ghana. You must go through a bank, a licensed investment firm, or another approved dealer.
The Different Types of Treasury Bills
In Ghana, treasury bills are typically classified by maturity:
91-Day Treasury Bill
This is the shortest standard tenor, lasting about three months. Because it matures quickly, its rate tends to respond rapidly to changes in the policy rate and market conditions.
182-Day Treasury Bill
This is a six-month bill. It offers a slightly longer commitment and usually a higher rate than the 91-day bill to compensate for the longer period.
364-Day Treasury Bill
This is a one-year bill. It typically offers the highest rate among the three because investors are locking their money for longer and facing more uncertainty about inflation and interest rates over that period.
The choice among these depends on how long you can afford to have your money tied up and what rate you find acceptable.
How to Buy Treasury Bills in Ghana
Step 1: Choose an Approved Dealer
The first step is to choose a bank or licensed investment firm that acts as a primary dealer or has access to the primary market. Most major commercial banks in Ghana offer treasury bill purchase services. Some investment firms also facilitate purchases.
Step 2: Open the Required Accounts
You will need an account with the dealer. If you are buying through your bank, your existing account may be sufficient, but some banks require a separate investment or securities account. You may also need a Central Securities Depository account, which is an electronic record of your holdings.
Step 3: Provide Your Identification
You will need a valid national ID, such as a Ghana Card, and proof of address. This is part of the Know Your Customer requirements that financial institutions must follow.
Step 4: Place Your Order
Tell the dealer how much you want to invest and which tenor you prefer. The dealer will include your bid in the auction conducted by the Bank of Ghana. In practice, most individual investors submit non-competitive bids, meaning they accept the rate determined at the auction.
Step 5: Pay for the Bill
If your bid is successful, you pay the discounted price. The funds are deducted from your account, and the bill is credited to your securities account.
Step 6: Receive Your Return at Maturity
When the bill matures, the full face value is credited to your account. The process is usually automatic, but you should confirm the settlement with your dealer.
How Treasury Bill Rates Are Determined
Treasury bill rates are not fixed by the Bank of Ghana in advance. They are determined through an auction process.
At the auction, the Bank of Ghana announces the amount the government wants to borrow and the tenors available. Investors submit bids, either competitive or non-competitive. Competitive bidders state the rate they are willing to accept. Non-competitive bidders simply agree to accept the average rate from the auction.
The final rates depend on demand and supply. If many investors want to lend to the government, rates may fall. If demand is weak, the government may have to offer higher rates to attract funds.
Several factors influence the rates:
The Policy Rate
The Bank of Ghana’s monetary policy rate serves as a benchmark. When the policy rate rises, treasury bill rates tend to rise. When it falls, bill rates tend to fall.
Inflation Expectations
Investors care about real returns — what they earn after inflation. If inflation is high or expected to rise, investors demand higher rates to protect their purchasing power.
Government Borrowing Needs
When the government needs to borrow heavily, it may accept higher rates to raise the required funds. Heavy borrowing can push rates up.
Banking Sector Liquidity
When banks have excess money, they may bid aggressively for treasury bills, pushing rates down. When liquidity is tight, rates may rise.
External Factors
Global interest rates, investor sentiment toward emerging markets, and the exchange rate can all influence domestic interest rates.
Who Buys Treasury Bills?
Treasury bills are bought by a wide range of investors:
Commercial Banks
Banks are major buyers of treasury bills. They use them to manage liquidity and earn returns on deposits.
Pension Funds
Pension funds invest in treasury bills as part of their portfolio. Because pension funds manage retirement savings, they tend to favour low-risk instruments.
Insurance Companies
Insurance companies also hold treasury bills as part of their investment portfolios, balancing safety with return.
Individual Investors
Individuals, including salaried workers, entrepreneurs, and retirees, buy treasury bills to earn a return on their savings without taking excessive risk.
Corporate Bodies
Companies with excess cash sometimes park it in treasury bills for short periods rather than leaving it idle in current accounts.
The Advantages of Treasury Bills
Low Risk
Treasury bills are backed by the Government of Ghana. Compared with lending to a private business or investing in shares, the risk of default is lower. That said, “low risk” does not mean “no risk.” Governments can and do face debt problems, as Ghana’s recent domestic debt restructuring showed.
Known Return
Because you buy at a discount and receive the face value at maturity, your return is known in advance if you hold to maturity. This certainty is valuable for planning.
Liquidity
Treasury bills are relatively liquid. The 91-day bill matures in three months, and even the 364-day bill is less than a year. If you need money before maturity, you may be able to sell on the secondary market, though this may involve costs and price risk.
Tax Treatment
Interest earned on treasury bills by individual Ghanaian residents has historically been exempt from income tax. This has made them more attractive than some other fixed-income investments. However, tax rules can change, so it is important to confirm the current status.
Accessibility
With a modest minimum investment, treasury bills are accessible to many Ghanaians. They are one of the simplest ways to participate in the government securities market.
The Disadvantages and Risks
Inflation Risk
The biggest risk for treasury bill investors is inflation. If inflation is higher than the bill’s rate, your real return is negative. Your money grows in cedi terms but loses purchasing power. This has happened in Ghana during periods of high inflation.
Reinvestment Risk
When your bill matures, the rate available on new bills may be lower than what you previously earned. This is reinvestment risk. It affects short-term investors especially, because they must frequently roll over their investments.
Default and Restructuring Risk
Treasury bills are not entirely free of default risk. In December 2022, Ghana announced a domestic debt exchange programme that affected holders of government bonds. Although treasury bills were largely exempted from the initial exchange, the episode reminded investors that government debt is not risk-free.
Opportunity Cost
Money locked in a treasury bill cannot be used for other investments. If a business opportunity or higher-yielding investment arises, you may miss it.
Liquidity Risk on the Secondary Market
While you can sell treasury bills before maturity, the secondary market in Ghana is not as deep as in larger economies. You may not always get the price you want, especially if you need to sell quickly.
Treasury Bills vs Fixed Deposits
Many Ghanaians compare treasury bills with fixed deposits. Both are fixed-income investments with known returns. But there are differences.
Fixed deposits are placed with banks and are typically protected by the Deposit Protection Scheme up to a certain limit. Treasury bills are obligations of the government. In practice, both are considered relatively safe, but the risk profiles differ slightly.
Treasury bill rates are determined at auction and can change weekly. Fixed deposit rates are set by the bank and may be more stable, but they may also be lower.
Treasury bills require you to go through the auction process, though dealers handle most of the mechanics. Fixed deposits are simpler to open.
The choice between the two depends on your preference for liquidity, rate, convenience, and the level of comfort you have with each instrument.
Treasury Bills vs Treasury Bonds
The key difference is maturity. Treasury bills are short-term, up to one year. Treasury bonds are long-term, typically two years or more. Bonds usually pay periodic interest, called coupons, while bills are sold at a discount with no periodic payments.
Because bonds lock money for longer, they usually offer higher rates to compensate for the additional risk and reduced liquidity. Investors who want steady income may prefer bonds. Those who want flexibility may prefer bills.
How Treasury Bills Fit into a Savings Plan
Treasury bills are a useful component of a savings plan, but they should not be the only component. A diversified approach considers your goals, time horizon, and risk tolerance.
For short-term goals — a planned expense within six months to a year — treasury bills can be a sensible parking place. For long-term goals, such as retirement, a mix of assets may be more appropriate.
It is also important to maintain an emergency fund in a highly liquid form, such as a savings account, before locking money into any investment.
Common Misconceptions
“Treasury bills are completely risk-free”
They are low-risk relative to many alternatives, but not risk-free. Inflation can reduce your real return, and government debt can be restructured.
“Only rich people can buy treasury bills”
While some investments have high minimums, treasury bills have historically been accessible to ordinary Ghanaians. The minimum amount has varied, so check current requirements with an approved dealer.
“Treasury bill rates are set by the government”
Rates are determined at auction based on supply and demand. The government influences rates through its borrowing needs and monetary policy, but it does not simply announce a fixed rate for each auction.
“You receive interest every month”
No. Treasury bills are sold at a discount. You receive the face value at maturity, and the difference between what you paid and what you receive is your return. There are no monthly interest payments.
“If I need money, I can get it back any time without cost”
You can sell treasury bills before maturity on the secondary market, but there may be costs, and the price may not be favourable. Holding to maturity is the simplest way to earn the full expected return.
Frequently Asked Questions
How much money do I need to buy treasury bills in Ghana?
The minimum amount has changed over time. In recent years, the minimum was GH₵500 for individuals purchasing through some banks, but check with your bank or the Bank of Ghana for the current requirement.
Where can I buy treasury bills?
You can buy through commercial banks, licensed investment firms, and other institutions approved as primary dealers or agents. You cannot buy directly from the Bank of Ghana as an individual.
How is my return calculated?
Your return is the difference between the discounted price you pay and the face value you receive at maturity. The effective yield depends on the discount rate and the number of days in the tenor.
Is the interest from treasury bills taxed?
Interest earned on treasury bills by individual Ghanaian residents has historically been exempt from income tax. However, tax rules can change, and institutional investors may face different treatment. Confirm the current rules with a licensed dealer or the Ghana Revenue Authority.
What happens if I need my money before maturity?
You may be able to sell your bill on the secondary market. The process involves your dealer and may result in a price below face value. It is generally better to invest only money you will not need before maturity.
What is the difference between the discount rate and the yield?
The discount rate is applied to the face value to determine the purchase price. The yield, or effective return, is calculated based on what you actually pay. The yield is slightly higher than the discount rate because you are earning a return on the discounted amount, not the full face value.
Are treasury bills safe after the domestic debt exchange?
The domestic debt exchange mainly affected longer-term bonds. Treasury bills were largely excluded, but the episode highlighted that government debt carries some risk. No investment is entirely risk-free.
How often are treasury bill auctions held?
The Bank of Ghana typically holds auctions weekly, usually on Mondays for 91-day and 182-day bills, and less frequently for 364-day bills. Your dealer can provide the current schedule.
What to Remember
Treasury bills are one of the simplest ways for Ghanaians to lend money to the government and earn a return. They are accessible, relatively low-risk, and offer a known return if held to maturity. But they are not a guaranteed path to wealth, and they are not immune to inflation.
The most important thing is to understand what you are buying. A treasury bill is a loan to the government. The rate you earn reflects the conditions in the economy at the time of the auction. Your real return depends on what inflation does during the life of the bill.
If you are looking for a safe place to park money for a few months or a year, treasury bills are worth considering. If you are looking for high growth over a long period, you may need to look at other assets. Either way, the decision should be based on knowledge, not hearsay.
The next time you see a treasury bill rate quoted, you will know exactly what it means — and whether it makes sense for your money.
Source: The Accra Daily Mail
Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of The Accra Daily Mail, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.
