By FORUM Business Editor
Times are hard. The economic reality in Sierra Leone is anything but rosy. The economic hardship has been severally stated as unfixable even from the nation’s chief executive and his former minister of finance.
According to banking experts, the interest rate savvy people of Sierra Leone have been overlooking an investment scheme with sure returns that requires little or no knowledge of how the banking system works to be able to reap excellent returns.
Investing in Treasury Bills, popularly called T-Bills is gaining traction and popularity in Sierra Leone. A lot of young people and those who earn just about enough are investing in the Bank of Sierra Leone T-Bills, reaping excellent returns at the end of the year, or your investment tenure of choice.
The annual interest rate return on T-Bills investment is 41 per cent. Therefore, if an investor deposits Le100 million with his or her bank and asks for that amount to be invested in Bank of Sierra Leone T-Bills, say, for 365 days, that individual would make Le41 million profit, or interest. A clever or smart investor could leave the Le100 million as principal and live off the Le41 million for a long time.
Treasury Bills Investment is a government guaranteed debt instruments issued by the Bank of Sierra Leone on behalf of Government to finance short-term expenditure. T-Bills can be bought for 91, 182, or 364 days.
The T-Bills cannot be bought directly from the Central Bank. After a customer deposits the required sum, between Le50 million and upward, at his or her local commercial bank, s/he instructs his or her investment banker advisor to invest said amount in T-Bills at the BSL. In other words, the Bank buys the T-Bills on behalf of the customers.
To qualify for investing in T-Bills one must be an account holder of the bank. The bank will issue forms to the customer stating intention, tenure and amount to invest for the purchase of the Treasury Bills. The customer would definitely need to produce either his or her national ID or passport or driver’s license or voter’s ID.
The purchasing of T-Bills works like this: The customer’s account should be funded with the amount to be invested before purchase is made. There is the possibility of roll over of the principal amount and interest upon maturity. The investor will choose the tenure that best suits his or her needs: 90 days, 180 days or 365 days. On maturity, a 15 per cent withholding tax on accrued interest is levied and paid to NRA. For most local banks the minimum investment amount is Le50 million.
For example, if you paid Le100 million for a T-bill that matures in one year, you would earn Le41 million in interest, for a yield of 41 per cent. When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.
But there is a downside to investing in T-Bills. For example, should interest rates rise, the existing T-bills fall out of favour since their return is less than the market value. For this reason, T-bills have interest rate risk, which means there is a danger that bondholders might lose out should there be higher rates in the future.
As times continue to get harder, it is of utmost importance for people to look for more revenue streams. It would be unwise for someone to have either won, saved or inherited Le50 million to then take that sum to travel and settle overseas where that money will finish due to the high standard of living.
By investing in your local bank and the Central Bank through investing in T-Bills, you not only bolster the local banking industry, you make your money available for investment in other local enterprises from the commercial and central banks.
