When it comes to short-term investments, two of the most common financial instruments in Nigeria are Commercial Papers (CPs) and Treasury Bills (T-Bills). Both provide a way to earn interest on idle funds, but they have significant differences in risk, returns, issuer, taxation, and investment requirements.
So, which one is better for you?
In this detailed guide, you’ll learn:
✅ What Commercial Papers and Treasury Bills are
✅ Key differences between them
✅ Risk and return comparison
✅ Which is the best investment for you
💡 Want to calculate your Treasury Bills earnings? Use our free Treasury Bills Calculator to estimate your returns before investing!
What Is a Treasury Bill?
A Treasury Bill (T-Bill) is a short-term government debt instrument issued by the Central Bank of Nigeria (CBN) on behalf of the Federal Government.
Features of Treasury Bills:
✔ Risk-Free Investment – T-Bills are backed by the Nigerian government, meaning there is no risk of default.
✔ Tax-Free Returns – Unlike many other investments, Treasury Bill earnings are not taxed.
✔ Sold at a Discount – Instead of receiving periodic interest, T-Bills are sold below face value and redeemed at full value at maturity.
Example of a Treasury Bill Investment:
- You buy a ₦1,000,000 Treasury Bill at a 30% discount rate.
- You pay only ₦770,000 upfront.
- At maturity, you receive the full ₦1,000,000, earning ₦230,000 profit.
💡 Want to estimate your Treasury Bill earnings? Try our Treasury Bills Calculator.
What Is a Commercial Paper?
A Commercial Paper (CP) is a short-term debt instrument issued by corporations, banks, or financial institutions to raise funds for working capital, operational costs, or expansion projects.
Features of Commercial Papers:
✔ Higher Returns Than T-Bills – Since CPs carry higher risk, they offer higher interest rates than T-Bills.
✔ Issued by Companies, Not Government – Unlike T-Bills, CPs are issued by corporations, meaning default risk exists.
✔ Shorter Maturity Period – CPs typically have durations of 15 days to 1 year, making them ideal for short-term liquidity needs.
Example of a Commercial Paper Investment:
- A company issues a ₦1,000,000 Commercial Paper with a 12% annual interest rate.
- You pay ₦1,000,000 upfront and receive ₦1,120,000 at maturity, earning ₦120,000 interest.
💡 Higher risk means higher reward! If you prefer a safer investment, use our Treasury Bills Calculator to compare T-Bill earnings.
Key Differences Between Treasury Bills and Commercial Papers
| Feature | Treasury Bills (T-Bills) | Commercial Papers (CPs) |
|---|---|---|
| Issuer | Central Bank of Nigeria (CBN) | Private corporations & banks |
| Risk Level | Low (Risk-Free) – Backed by FG | Higher Risk – Default possible |
| Returns | Lower but guaranteed | Higher but not guaranteed |
| Maturity Period | 91, 182, or 364 days | 15 days – 1 year |
| Interest Payment | Sold at discount, no direct interest | Pays interest at fixed rates |
| Taxation | Tax-Free | Taxed at standard rates |
| Minimum Investment | ₦50 million (Primary), ₦1,000+ (Secondary) | ₦5 million+ |
| Liquidity | Can be sold in secondary market | Can be negotiated or transferred |
| Purpose | Government funding | Corporate financing & short-term funding |
💡 Not sure which is best for you? Use our Treasury Bills Calculator to see T-Bill earnings before making a decision.
Risk and Return Comparison: Treasury Bills vs. Commercial Papers
1️⃣ Risk Comparison
✅ Treasury Bills – Zero risk because they are backed by the Federal Government of Nigeria.
❌ Commercial Papers – Higher risk because they depend on the company’s ability to repay.
2️⃣ Return on Investment
✔ T-Bills offer lower returns than CPs but are guaranteed.
✔ CPs offer higher returns but have default risk.
📌 If security is your priority, Treasury Bills are the best option. Use our Treasury Bills Calculator to estimate your earnings.
Which Is the Better Investment?
Treasury Bills Are Best If You Want:
✅ Zero Risk – No chance of losing money
✅ Tax-Free Earnings – Keep 100% of your profit
✅ Government-Backed Security – No risk of default
💡 Perfect for investors who prioritize safety and guaranteed returns.
Commercial Papers Are Best If You Want:
✅ Higher Returns – Higher risk, but higher potential earnings
✅ Short-Term Investments – CPs can be as short as 15 days
✅ Corporate Exposure – If you trust a company, you can invest directly
💡 Best for investors willing to take a risk for bigger profits.
How to Invest in Treasury Bills or Commercial Papers
✔ To buy Treasury Bills, apply through your bank or buy in the secondary market if you have less than ₦50 million.
✔ To buy Commercial Papers, contact a licensed investment bank or stockbroker.
📌 Want to estimate your T-Bill returns before investing? Use our Treasury Bills Calculator today!
Final Thoughts – Treasury Bills or Commercial Papers?
✅ If you want safe, government-backed, and tax-free returns, Treasury Bills are the best option.
✅ If you are willing to take some risk for higher returns, Commercial Papers might be worth considering.
📌 Before investing, check the latest rates and calculate your expected earnings using our Treasury Bills Calculator.