Treasury Bills (T-Bills) are short-term debt instruments issued by the Government of the Republic of Zambia (GRZ) through the Bank of Zambia (BoZ) to finance short-term budget deficits and manage monetary policy. For individual, corporate, and institutional investors, they represent one of the most secure ways to earn a fixed return on excess capital within the Zambian financial market.
This guide provides an exhaustive breakdown of how Treasury Bills work in Zambia, how yields are structured, the registration and bidding workflows, and how they compare directly to alternative asset classes.
1. Understanding the Asset Class: What is a T-Bill?
Unlike long-term Government Bonds that pay periodic interest (coupons), Treasury Bills are short-term instruments with maturities of one year or less. They do not pay a regular interest payment. Instead, they are issued using a discount mechanism.
The Discount Mechanism Explained
Treasury Bills are purchased at a price below their face value (the maturity amount). At the end of the investment term, the Bank of Zambia pays the investor the full face value. The profit—or discount income—is the difference between the lower purchase price (cost value) and the final face value received.
Core Principle: You pay less today to receive the full amount tomorrow. The difference is your return.
2. Treasury Bill Tenors and Suitability
The Bank of Zambia issues Treasury Bills across four specific maturity structures, known as tenors. Each serves a different liquidity preference and investment horizon:
| Tenor | Target Horizon | Investment Suitability |
| 91 Days | 3 Months | Ultra-short-term cash management; ideal for businesses holding tax provisions or short-term operating capital. |
| 182 Days | 6 Months | Short-term capital preservation; well-suited for seasonal business cycles or near-term household goals. |
| 273 Days | 9 Months | Medium short-term positioning; balances higher yields against sub-one-year capital lockup. |
| 364 Days | 12 Months | Maximum yield within the short-term market; ideal for structural annual savings or regular cash rotations. |
3. Minimum Requirements and Bidding Tiers
To ensure accessibility for retail savers while accommodating institutional liquidity, the Bank of Zambia segments the bidding process into two distinct categories based on transaction size:
Minimum Investment Threshold
- Face Value Minimum: ZMW 1,000.
- Increments: Bids must be submitted in multiples of ZMW 1,000.
Bidding Categories
Non-Competitive Bidding (Retail and Small Corporate Investors)
- Threshold: Up to ZMW 499,000 per tenor per auction.
- Mechanism: Investors do not bid on rates. Instead, they accept the weighted average yield determined by institutional bidders at the auction.
- Allocation: Guaranteed allocation of the asset, provided the application is error-free and funded.
Competitive Bidding (Institutional and High-Net-Worth Investors)
- Threshold: ZMW 500,000 and above per tenor.
- Mechanism: Bidders explicitly state both the volume they want to buy and the minimum yield (discount rate) they are willing to accept.
- Allocation: Not guaranteed. Bids are ranked from the lowest rate to the highest until the required government funding pool is filled. The highest accepted rate becomes the “cut-off price”.
4. How Returns Are Calculated (The Math of T-Bills)
Because T-Bills are discounted instruments, calculating your upfront cash outlay requires understanding how the purchase price is derived from the annualized yield.
The Bank of Zambia operates on a 365-day year convention for yield equations.
The Formula Hierarchy
To find the actual cost price per ZMW 100 of Face Value:
Cost Price = 100 / (1 + (Yield * (Days to Maturity / 365)))
To find the total amount deducted from your bank account for your order:
Total Capital Outlay = (Cost Price / 100) * Desired Face Value
Step-by-Step Worked Example
If an investor applies for a 364-day Treasury Bill with a face value of ZMW 100,000 at an annualized yield of 12.2%:
- Convert Yield to Decimal: 12.2% = 0.122
- Calculate the Time Factor: 364 / 365 = 0.99726
- Compute the Denominator: 1 + (0.122 * 0.99726) = 1.121665
- Determine the Price per ZMW 100: 100 / 1.121665 = ZMW 89.153
- Calculate Final Bank Account Deduction: (89.153 / 100) * 100,000 = ZMW 89,153
The Net Payoff Breakdown
- Face Value Owned: ZMW 100,000
- Actual Capital Invested: ZMW 89,153
- Gross Profit (Discount Income): ZMW 10,847
5. Fees, Taxation, and Net Yield Realities
Gross yields published by the Bank of Zambia do not represent the final deposit into your settlement account. Investors must account for two mandatory statutory charges:
Withholding Tax (WHT)
Withholding Tax on Government Securities stands at 20%. This tax is applied strictly to the profit (discount income), not the total principal. It is a final tax for retail individuals.
Handling Fee
The Bank of Zambia levies a mandatory 1% handling fee on the gross face value of the T-Bill at maturity.
Continuing the Worked Example to Net Income
Using the gross discount income of ZMW 10,847 from the previous section:
- WHT Deduction (20% of Profit): 0.20 * 10,847 = ZMW 2,169.40
- Handling Fee (1% of Face Value): 0.01 * 100,000 = ZMW 1,000.00
- Total Statutory Deductions: ZMW 2,169.40 + ZMW 1,000.00 = ZMW 3,169.40
- Net Profit Realized: ZMW 10,847.00 – ZMW 3,169.40 = ZMW 7,677.60
6. The End-to-End Investment Pipeline
Treasury Bill auctions occur bi-weekly (every second Thursday). The administrative loop to participate requires following a strict operational sequence:
Step 1: CSD Profile Setup -> Step 2: Bid Submission -> Step 3: Auction & Settlement -> Step 4: Maturity Maturity
Step 1: Open a CSD Account
You cannot hold government securities without a Central Securities Depository (CSD) number issued by the Bank of Zambia.
- Approach your commercial bank’s treasury desk or an authorized broker licensed by SEC Zambia.
- Complete the CSD application form, submitting your National Registration Development Card (NRDC), TPIN certificate, and proof of banking details.
Step 2: Submit Your Tender Application
- Complete a Treasury Bill Tender Form before the auction deadline (typically 10:00 AM on the Wednesday preceding the Thursday auction).
- Indicate the desired Face Value, the target Tenor, and select Non-Competitive (unless bidding above ZMW 499,000).
Step 3: Auction Processing and Funding
- On Thursday afternoon, BoZ runs the auction algorithm.
- On Friday morning, the settlement results are communicated. Your commercial bank will receive a direct debit instruction for the exact Cost Value (not the face value) of the asset. You must ensure your retail account contains cleared funds by midday on Monday.
Step 4: Maturity Settlement
At the end of the tenor, the asset automatically unwinds. The Bank of Zambia credits your nominated commercial bank account with the full face value, minus the 20% WHT on profit and the 1% handling fee.
7. Strategic Investment Comparison
How do Treasury Bills stack up against alternative investments in the Zambian marketplace?
| Metric | Treasury Bills | Government Bonds | Commercial Fixed Deposits | High-Yield Unit Trusts |
| Duration | 91 to 364 Days | 2 to 15 Years | 30 Days to 2 Years | On-Demand / Fluid |
| Payout Style | Upfront Discount | Semi-Annual Coupons | At Maturity | Monthly Accrual |
| Risk Profile | Sovereign (Lowest) | Sovereign (Lowest) | Commercial Bank Credit Risk | Market/Portfolio Risk |
| Liquidity | Moderate (Secondary Market) | High (Active Secondary) | Low (Early break penalties) | Very High (24-48 hr exit) |
| Minimum Capital | ZMW 1,000 | ZMW 1,000 | Varies (Typically ZMW 5,000+) | Varies (Often ZMW 100+) |
8. Key Investment Risks to Monitor
While Treasury Bills are free from default risk (backed by the taxing power and fiat issuance of the state), they are vulnerable to macroeconomic forces:
- Inflationary Erosion: If a 364-day T-Bill yields a net return of 9.5%, but national inflation rises to 14%, your nominal capital increases while your real purchasing power shrinks.
- Opportunity Cost: Capital locked in a 12-month T-Bill cannot easily pivot if monetary policy tightening causes subsequent auctions to yield significantly higher rates.
- Secondary Market Discounting: If you need emergency cash and sell your T-Bill via a commercial bank broker before maturity, you may be forced to accept an adverse discount rate, eroding your projected returns.
9. Common Mistakes to Avoid
- Over-identifying Face Value with Cost Outlay: Assuming that buying a ZMW 50,000 T-Bill requires having exactly ZMW 50,000 in your bank account on settlement day. You need less. Failing to maintain the correct liquidity balance leads to rejected bids and potential compliance flags at the central bank.
- Miscalculating the 1% Handling Fee: Forgetting that the 1% fee applies to the entire face value, not just the profit. On very short tenors (like 91 days) with low nominal yields, this handling fee consumes a substantial proportion of the total gross return.
- Ignoring the Auction Schedule: Attempting to submit bids or fund accounts on auction day itself. The Bank of Zambia runs automated settlements, and missing systemic cut-offs can disrupt cash flow allocations for weeks.
This video breaks down how the Bank of Zambia determines auction discount pricing and calculates the precise amount deducted from your settlement account when acquiring government securities.
Understanding Bank of Zambia Securities Pricing & Deductions