News Column

FDC Report - Nollywood, a Goldmine Ready to Be Tapped

July 7, 2014

According to a report by Financial Derivative Company Limited, the immense potentials of the entertainment industry, especially the local film industry, as reflected in the recent rebasing of the economy may end the long search for an alternative to oil import, which successive administrations have been looking for, writes Festus Akanbi

The economic reality of the recent rebasing of Nigeria's Gross Domestic Product (GDP) has continued to provoke deep analyses on the depth of the nation's economy in the midst of enormous potentials brought to the fore by the rebasing exercise. Today, Nigeria is described as a middle income, mixed economy and emerging market, with expanding financial, service, communications, technology and entertainment sectors. It is ranked 26th in the world in terms of GDP (nominal: 30th in 2013 before rebasing, 40th in 2005, 52nd in 2000), and is the largest economy in Africa (based on rebased figures announced in April 2014). It is also said to be on track to becoming one of the 20 largest economies in the world by 2020.

And according to Wikipedia, the nation's re-emergent, though currently underperforming, manufacturing sector is the third-largest on the continent, and produces a large proportion of goods and services for the West African region. Earlier this year, Nigeria changed its economic analysis to account for rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry. As a result of this statistical revision, Nigeria has added 89 per cent to its GDP, making it the largest African economy.

Eye Opener According to the rebasing exercise, one of the most promising export potentials is the film industry popularly referred to as Nollywood industry.

There is no doubt that the new GDP served as an eye-opener to the enormous potentials in the nation's entertainment industry which economic affairs commentators said would effectively take away pressure from the oil sector if well harnessed. The primary purpose for the rebasing exercise was to reflect more accurately the sectors that were almost non-existent or at their infancy in 1990. These include the music, film industry and telecommunications industry, but to name a few. The telecommunications industry may have drawn the most attention during the GDP rebasing exercise; with MTN, Airtel and Globacom, now synonyms for corporate affluence, as realistic products of the rapid development of an industry that was negligible just two decades ago. Even more impressive is Nigeria's domination of the African movie industry. In fact, the Nigerian movie industry, also referred to as "Nollywood", is reported to be the second largest in the world.

The FDC's Report It was the same sentiment that reflected in the June 27 report of the Lagos-based financial and investment advisory firm, Financial Derivatives Company Limited, titled: "Exporting Nollywood as an Alternative to Oil and Gas." The publication captured the opinions of economic analysts which centre on a tripod consisting of adequate funding, improvement in product qualities and of course, good marketing.

On the issue of better quality, it is believed that better quality movies would not only improve the perception of the domestic industry and the country's image, thus attracting foreign investors, but also the revenue accrued from the industry. As a result, tax receipts are expected to increase whilst provisions are made for better-quality jobs for Nigeria's growing populace. This expectation, according to the FDC, further corroborates the need for the Federal Government to do all within its capacity to drive this initiative.

To draw a line between quantity and quality, the report has it that only India's Bollywood releases more movies than the Nigerian movie industry. Although the sheer volume of movies produced in the two jurisdictions outstripped the productions in the US, in terms of revenue, Hollywood remains the World's most valuable while Nollywood is Africa's most valuable film industry, generating $590m annually. This development, no doubt, makes it imperative that the government continues and improves its support of the industry, recognising the entertainment industry as not just a strategic medium through which the rest of the world gets a cultural education on Africa's most populous country, but also as a potential source of increased tax revenues and foreign exchange flows.

The report by the FDC noted that the movie industry was largely dominated by foreign movies and acts. However, since the 1990s, locally produced and marketed movies have taken prominence as majority of the Nigerian movies audience opt for low-budget movies with captivating stories that are centred on common human values and the West African cultural reality. Similarly, less than a decade ago Nigerian, airwaves were dominated by international songs, and most club DJs had to ensure that the majority of tracks on their playlists were foreign records or risk the loss of an audience. MTV hardly played African music and Nigerian artists earned peanuts relative to the amounts they command today. In recent times however, this trend is reversed as club DJs and TV stations have their tracks dominated by local records.

"Nollywood is now estimated to be worth about N853.9billion ($5.1billion), about 1.2 per cent of the revised GDP number. An average of 966 films was released per annum between 2005 and 2011. Nigeria's average release was only surpassed by India's during the same period as the 1.2 billion population country churned out an average release of 1,202 movies. "Nigerian movies remain competitive in their own unique niche but are far from comparable to more conventional movie industries," FDC said.

Funding Gap It is a fact that there persists a huge funding gap between Nigerian film production and those of the Indian and American markets. This results in the classification of Nigerian movies as semi-professional by global films industry standards, with most productions reflecting an industry of almost vestigial quality. On the other hand, the music industry has witnessed a meteoric rise in recent years as the quality of music and marketing techniques continue to improve.

The FDC said the ubiquitous nature of technology employed in the industry and increased Internet penetration have contributed significantly to this progress, providing relative ease to industry entrants. Mobile channels like the 'MTN Callertunez' platform provide musicians with an added revenue stream. Harrysong recently made millions on commissions that accrued from sales of callertunez of his hit song "Mandela", a dirge celebrating the life of the late African leader. P-square, D'banj, Flavor, 2face Idibia and Davido have become household names, raking in millions for entertaining not just Nigerians, but global citizens on and beyond the domestic shore. The creative arts industry holds the potential to enrich Nigerians of all ages but also provides much needed therapy to help soothe the social woes that plague this developing nation.

Government Input Recognising government input in the movie industry, the FDC report said Federal Government, through the Nigerian Export-Import Bank (NEXIM), manages the Nigerian Creative Entertainment Industry Stimulation Loan Scheme (NCEILS), an initiative aimed at enabling the entertainment industry to produce more movies, more hit songs and provide more jobs. The report however, maintained that for the industry to inch closer to its potential, the government needs to ramp up its commitments. "The number of movies produced may increase, but these have to be of high quality; to achieve this, better production equipment and funding is required. As the industry grows, more funds would have to be committed to greater marketing and distribution of the movies to reach as large an audience as provides the most returns."

Again, FDC said "Cinema infrastructure in the country continues to improve but is far from sufficient to self-sustain the domestic industry, and thus remains a limiting shortfall for the industry." It believed that "With the necessary cinema infrastructure in place, moviemakers can secure returns on their investments from the box office before proceeding to the DVD retail market, which is largely dominated by piracy. As at 2011, Nigeria had only 55 indoor cinemas, which pales in comparison to, for instance, the 5,827 indoor cinemas in the United States," noting that a variety of factors may be responsible for the large shortfall.

"For example, the high level of poverty limits the purchasing power of the majority of Nigerians, thus reducing the affordability of such modes of entertainment and effectively hampering the demand for cinemas. However, with increased investments, more Nigerians are employed, providing more income and as a result increasing the demand for more cinemas. Nollywood is patronised far beyond Nigeria partly due to improvements in digital technology." Analysts said Nigeria as a nation continues to remain one with tremendous potentials but warned that the country would remain an entity with tremendous potential - if Nigeria remains over dependent on the oil and gas industry and adequate investments are not made in initiatives that are more promising.

And as the FDC report puts it, "The music industry continues to impress, transforming the global perception of Nigerians and employing teeming Nigerian youth whilst proving to be a lucrative venture for zealous entrepreneurs. "Nollywood has also been identified as a promising industry with the potential to unlock both economic and social benefits. The industry has already hinted at its promise and is internationally competitive despite relatively little financial input." It called for more investments in order to improve the quality and marketing of movies, but also enable the establishment of a self-sustaining domestic cinema industry.

In conclusion the research firm said the industry remains far from its potential and with increased investments should not only help employ and entertain a significant portion of the Nigerian populace, but also provide forex flows from a growing international customer base.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters