What Is a Treasury Bill?
A Treasury bill is a short-term loan you make to the Government of Ghana. It is the most widely held investment instrument in the country, and the mechanics are simpler than the terminology suggests.
Head of Fixed Income Research · · 2 min read
Illustrative sample. This guide was written to demonstrate FlowWealth’s publication format and is not a published research view. Figures are illustrative and must not be relied upon for any decision.
What is it?
A Treasury bill — a T-bill — is a short-term loan to the Government of Ghana. You lend a sum for a fixed period of 91, 182 or 364 days. At the end the government repays the full face value. Your return is the difference between what you paid and what you receive, because bills are sold at a discount to face value rather than paying periodic interest.
Why does it matter?
T-bills are the reference point for almost every other return in Ghana. They set the benchmark against which savings accounts, corporate borrowing and equity returns are all implicitly measured, because they represent what is available without taking on company-specific risk. If you understand T-bills, you have a yardstick for judging every other offer you are shown.
A Ghanaian example
Suppose you buy a 91-day bill with a face value of GHS 10,000 at a discounted price of GHS 9,650. You pay GHS 9,650 today. In 91 days the government pays you GHS 10,000. You have earned GHS 350 over roughly three months. Annualised, that is a rate in the region of 14–15% — and that annualised figure is what gets quoted, even though you only held the bill for a quarter of a year.
The numbers
- Available tenorsThe 91-day bill is the most widely held
- 91, 182 and 364 days
- Minimum investmentVaries by bank or broker
- Typically GHS 100–1,000
- How you buyWeekly primary auction
- Through a bank or licensed broker
- How returns are paidSold at a discount; no periodic coupon
- At maturity, as face value
- Early exitPrice is not guaranteed and access varies
- Secondary market sale
How the discount works#
The part that confuses most first-time buyers is that a Treasury bill does not pay you interest along the way. There is no monthly payment. There is one transaction at the start and one at the end.
You pay less than the face value at the start. You receive the full face value at maturity. The difference is your return.
This is called buying at a discount, and it is why the price you pay is always below the amount you get back. If someone quotes you a bill "at 15%", that is the annualised return implied by the discount — not a payment you will receive.
Why the quoted rate confuses people#
The rate on a 91-day bill is annualised, meaning it expresses what you would earn if you kept rolling the bill for a full year at the same rate.
You will not earn 15% in 91 days. You will earn roughly a quarter of that in 91 days. Whether you get the full annualised rate depends on whether you can reinvest at similar rates when the bill matures — which, in a falling-rate environment, you generally cannot.
That gap between the quoted annual rate and what you actually receive over a quarter is the source of most disappointment among first-time T-bill holders.
The safety question, answered honestly#
Treasury bills are often described as risk-free. They are low risk, and that distinction is worth being precise about.
The government has the strongest capacity to repay of any borrower in the country. But in 2022–23 Ghana restructured its domestic debt, and holders of government securities took losses. Short-dated bills were treated differently from longer bonds, but the episode established the general principle: government paper carries less risk than corporate paper, not zero risk.
Inflation risk applies regardless. If prices rise faster than your return, you receive more cedis at maturity that buy less than the money you started with. The government repaid you in full and you are still worse off. This is the risk that affects T-bill holders most often, and it is the one least discussed.
Common Mistakes
- Choosing the tenor with the highest rate rather than the one matching when the money is actually needed.
- Comparing the annualised quoted rate against a three-month return without noticing they cover different periods.
- Assuming a Treasury bill is risk-free — Ghana's 2022–23 domestic debt exchange showed that government paper can be restructured.
- Forgetting withholding tax, so comparing a gross T-bill rate to a net bank rate.
- Overlooking inflation, and treating a high nominal return as a real gain when it may not be.
FlowWealth Takeaway
A Treasury bill is a short, fixed-term loan to the government with a known repayment date. Match the tenor to when you need the money, compare the return after tax and after inflation, and remember that "safe" means low risk, not no risk.
Sources
- Bank of Ghana, Treasury bill auction results and investor information
This is financial education, not investment advice. It explains how something works; it does not recommend what you should do. What is appropriate for you depends on your circumstances, and FlowWealth does not provide personalised investment advice.
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