FUNDING, COMMERCIAL LAW, AND THE NIGERIAN ENTERTAINMENT INDUSTRY

Authored By :

Babatunde Adesoji Fasogbon

In 2016, the Arts, Entertainment, and Recreation sector generated N239 billion in revenue, culminating in about 2.3% of Nigeria’s GDP for that year. Nollywood, which is the movie production subsector of the entertainment and creative industry, is globally recognized as the second largest film producer in the world, coming behind America’s Hollywood and ahead of India’s Bollywood. The musical subsector of the entertainment industry in Nigeria is also not far behind, as a study conducted by Statista revealed that the music sector’s revenue grew from 26 million US dollars in 2014 to 34 million dollars in 2018. This figure according to the research and projection by Statista, is expected to grow to 44 million dollars by 2023.

The number of film production annually, currently stands at around two thousand five hundred, with a projection of $22million by 2022 for total cinema revenue alone. As a result of the industry’s successes, Nollywood most especially, in the local and international markets, in 2018, global streaming giant, Netflix acquired worldwide rights to Lion Heart, a Nigerian movie directed by Genevieve Nnaji. In that same year, Netflix announced that it will be putting out an $8 Billion budget to work in the Nigerian movie industry. In furtherance of this, in February 2020, Netflix made its official debut in Nigeria, acquiring and distributing Nigerian filmed content. Since then, it has gone ahead to acquire several Nigerian movies, including The Wedding Party, Elevator Baby, Oloture, King of Boys, and a host of others. Currently, Nigerian movie producers can enter into publishing and streaming deals with Netflix for their local content. Local movie streaming platforms have also emerged, with Iroko TV being a key player in this regard.

The music sector is also not far behind as it has also recorded significant growth over the years with the total music revenue in Nigeria estimated to rise to $73million by 2022 (with a compound annual growth rate of 13.4%). In the past six years, the growing numbers of new production studios and artists enabled a more vibrant and self-sustaining industry. The music sector is so dynamic and constantly evolving that it has aided the production of world-class quality music; Nigerian musicians have developed a vast spectrum of music genres and have won prestigious awards with artists like Wizkid and Burnaboy claiming Grammy awards hence attracting more and more investments from several sources. Spotify, the global leader in music streaming has also taken an interest in the Nigerian market and has plans to move into Nigeria as part of a broader global expansion.

The statistics from these studies reveal that the entertainment industry possesses both the capacity to support millions of teeming youths and the ability to generate considerable revenue for the economy; the industry currently employs about a million people and this number is expected to increase before the end of 2022.

It is therefore very puzzling why despite the contributions made by the industry towards the growth of the Nigerian economy, and how beautiful the statistics look on paper, the industry is plagued by several challenges like piracy, copyright infringement, and most importantly, FINANCE.

These are…

…THE ISSUES

The industry barely receives support from the government (despite being made subject to various taxes and levies by the various tiers of government) and investors; both local and foreign (except Netflix and Spotify of recent). Sadly, as a result of this, investors are hardly keen on investing in the entertainment industry. Furthermore, investing in the entertainment Industry (most especially the music sector) more often than not appears to be a herculean and confusing venture. This is hugely attributed to the vaguely defined business structure of the industry. For example, an investor seeking investment opportunities in an organization would expect that the financial statements are duly audited by a competent accountant or accounting firm. They would also expect that forecast and projections are properly done and that the management team and corporate structure of the intended firm are clearly defined. Sadly, most of the music record labels in Nigeria cannot boast of possessing all these criteria, and this continues to stand in the way of solid investments.

In a bid to support the entertainment industry in 2010, Former President Goodluck Ebele Jonathan at the 30^th Anniversary of Silverbird Group announced a $200million donation to support the industry. The sum was to be distributed to the players in the sector in form of loans, and it was to be administered by the Nigerian Import and Export Bank (NEXIM Bank) and the Bank of Industry (BOI). Similarly in 2012, at the 20th-anniversary celebration of Nollywood, another announcement of a N3billion grant tagged “Project Nollywood”, was also made by Former President Goodluck Ebele Jonathan and it was supposed to be managed and distributed by the Ministry of Finance in collaboration with the Ministry of Culture and Tourism.

However, how these support funds were utilized remains undetermined as several Nollywood stars have stated that they did not receive the said funds as promised. Along the same lines, the BOI in 2015 denied receiving the $200 million donation from the former president.

In a similar vein to contribute to the entertainment and creative industry, the BOI initiated a N1billion special facility for Nollywood, known as “the BOI Nollyfund”. The intervention was initiated by the BOI because Nollywood was a very important emerging sector in the economy and It contributed 1.42% ($7.3 billion or N1.4 trillion) to Nigeria’s Re-based GDP in 2013, It had also contributed to enhancing the image of Nigeria as Nollywood movies were being watched globally.

However, the terms and conditions for accessing the funds appear to be quite strenuous. These conditions include the assigning of copyright as collateral for receiving the funds and the requirement for a distributor to issue an undertaking to remit all cinema proceeds of the film based on agreed arrangements, to BOI designated banks. These conditions amongst others appeared to be quite stringent and unpleasant to the industry practitioners.

It is important to note that there are other ways in which the government can support the entertainment industry apart from making and establishing donations and support facilities. A major way in which the government can make the entertainment industry attractive is in the provision of various incentives to the entertainment and creative industry. As a matter of fact, in 2017, the Federal Government included the creative sector on the pioneer status incentive list, as a way of contributing to its development.

Pioneer Status Incentive (“PSI”) is a tax holiday incentive provided for under the Industrial Development Income Tax Relief Act. It grants qualifying industries and their products relief from the payment of corporate income tax for an initial period of three years, which is renewable for another one or two additional years.

Section 1 of the Act provides that any industry may be designated as “pioneer” where the president is satisfied that it is not being carried on in Nigeria on a scale that is suitable to the economic requirements of Nigeria or at all, or there are favourable prospects of further development in Nigeria or it is expedient and in public interest to encourage the development or establishment of such industry in Nigeria by declaring the industry to be a pioneer industry and any product of the industry to be a pioneer product.

It is indisputable that tapping into this is beneficial for the entertainment and creative industry as the PSI covers the production of digital movies, animations, videos, television programmes, commercials (including online distribution and exhibition), music production, publishing, and online digital music distribution, production of Cameras, motion pictures and slide projectors and many more. Consequently, any organisation in the Industry engaged in any of the aforementioned businesses is required to apply to the Nigerian Investment Promotion Commission (NIPC) for a Pioneer Status Certificate, in order to enjoy the PSI.

In conclusion, the contribution of the entertainment industry to Nigeria’s economic and social growth cannot be overstated. The industry has been responsible for the creation of over a million jobs and is still creating more jobs for Nigerians; albeit the sector barely enjoys support from investors and the government. If the entertainment industry can get the adequate support it needs, it is indubitable that the quality of content being produced and released yearly will improve.