In 2016, the Nigerian Film Industry was recognised as the largest film producer in the world with an estimated contribution of 2.3% (NGN239 billion) to the nation’s Gross Domestic Product (GDP).[1] Despite the contribution made by the industry towards the growth of the Nigerian economy, the industry is plagued by several challenges, one of which is, finance. The Nigerian film industry (Nollywood) frequently encounters funding and financing problems.[2]

In simple terms, financing is defined as the capitalisation of or the act of raising capitals. There are several mechanisms for financing the film industry in Nigeria. Some of these mechanisms shall be analysed subsequently:

1. Government and private institutions’ grants/ loans: This is the most relied form of funding for the film industry. A grant is an award, usually a financial award by one entity to an individual or a company to facilitate a goal or incentivize performance. While a loan is an amount given by an entity to an individual or a company. The difference between a grant and a loan is that a grant is usually not repayable while a loan is usually repayable with specified conditions. The Government and private institutions usually provide grants or loans to filmmakers. In 2021, the Minister of Information announced that the Central Bank of Nigeria in collaboration with the Banker’s Committee initiated a plan to grant an access N500m loan with 9% interest rate to support the entertainment industry.

   

   The Bank of Industry also established the Nollyfund in 2015. This fund was established to provide capital by way of a loan to Nigeria’s leading movie producers.[3]

2. Private equity: This is another funding mechanism that may be adopted by the film industry. Private equity has the potential of playing a significant role in bridging the funding gaps encountered by filmmakers. Private Equity is a form of equity financing. It is a capital acquisition mechanism in which a firm invest funds in a film company with the intention of owning a stake in the company or in the return of the company. Usually, angel investors or venture capital funds invest their funds in support of a project which they believe would earn returns. The viability of the project and other risk analysis considerations are the major considerations investors consider before investing.An equity finance is not required to be repaid as opposed to a debt financing. Instead, the equity investor usually recoups his investment from the profits of the venture by owning a stake in the company.  Although, private equity investment is usually common with technology startup financing, however, the Nigerian film industry may consider adopting this financing measure for financial bankable and viable projects.

In addition to the above financing means, a film company may also task its members in form of contributions and seek financial assistance from friends and family etc.

The implications of the varying financing model adopted differ. For example, while a grant is not usually repayable, a loan would be repayable mostly with interests. In the circumstance that the private equity model is adopted, even though the founders are not required to repay the sums invested in the business, nonetheless, the investor would usually own a stake in the company for a defined period pending when he is able to recoup his investment.

In conclusion, as filmmakers take decisions with regards to the financing of their works and projects, it is essential that they scrutinize and analyse the implications of the financing methods opted upon. Furthermore, regardless of the financing measures adopted, the major factor to be considered is the feasibility and legal considerations of the financing method adopted. Notwithstanding the size of the project, it is advised that legal and financial professionals be consulted by filmmakers and other relevant persons in order to protect their interests.

RESOURCES

[1] Spotlight – The Nigerian Film Industry. Available online at https://www.pwc.com/ng/en/publications/spotlight-the-nigerian-film-industry.html on June 11, 2021

[2] Ololade Omolola Adeola, ‘Funding as a Major Challenge to Nigerian Film Makers; a Hindrance to International Competition’ Available online at https://medium.com/@Omohlorlah/funding-as-a-major-challenge-to-nigerian-film-makers-a-hindrance-to-international-competition-9f82fe927671 on June 11, 2021

[3] ‘Bank of Industry introduces Nollyfund’ Available online at https://www.boi.ng/bank-industry-introduces-nollyfund/ on June 11, 2021

https://www.boi.ng/bank-industry-introduces-nollyfund/ on June 11, 2021