The contribution of the non-oil sector to Nigeria's economy continues to expand, relative to the oil sector due to a combination of lower oil prices and Nigeria's low oil production output. Despite the negative GDP growth rate recorded in the second quarter of 2016, the contraction of the economy was less severe due to the relatively diversified non-oil sector, which was buoyed primarily by growth in only seven sectors, one of which was the creative industry sector.
The creative sector has become a key component of Nigeria's drive towards economic diversification and a key contributor to its services' sector export. Its growth in the last decade has been indeed phenomenal. Nollywood is the second largest movie industry in the world after Bollywood, producing an average of 1,000 movies a year. It has a huge global following, not just among Nigerians at home and abroad, but also among continental Africans and other people of African descent all over the world who want to have a feel for what is happening in their motherland.
Nigeria's music industry is also following closely behind. It is not unusual to find Nigerian artists collaborating in one form or the other with international superstars. More than a few years back, such progress would have been unfathomable.
The exploits of the Nigerian film and music industry, which accounts for a huge part of Nigerian and African intellectual property value leaves one to wonder how its great achievement was accomplished and how its growth is now being funded.
Funding from Deposit Money Banks
Deposit Money Banks (DMBs) have been a huge source of support to this sector through the extension and expansion of credit and the establishment of special financing schemes. DMB's lending to the sector has grown over the years, following the introduction of structure into creative industry enterprises, which makes them more viable, sustainable and scalable. Other sources of its financing have come from funding by original content providers such as cable networks and streaming/Video-On-Demand (VOD) services; grants and interventions by the government and personal pockets. The growth of the sector is also partly due to its reliance on high turnover, low-cost productions, which was its way of adapting to its funding environment, and its hitherto inefficient distribution system.
Support from the banking system has included Nexim Bank's Nigerian Creative Arts and Entertainment Facility Loan, that is aimed at improving quality at all stages of the creative industry's value chain from production to post-production and retail distribution. It is also aimed at harnessing the industry in a structured manner for it to better attract investment capital.
The Bank of Industry (BoI) also established its Nollyfund, a N1 billion fund to support film makers/producers. To make sure that the facility is dispensed in a prudent manner, the bank only considers limited liability companies, and enterprises engaged in the film production value chain and is expected to create a minimum of 2,000 direct and 5,000 indirect jobs in the economy.
Access bank's Access NollyFund also plays in this space. It provides a Film Production Finance Facility to facilitate the production and distribution of Nigerian movies; asset acquisition/improvement finance for the purchase of film production equipment and the expansion of production centres and film making hubs.
United Bank of Africa (UBA) also provides access to finance for production activities, entertainment infrastructure, studio equipment, advisory services, and cash management for the industry.
Confronting existing challenges
Following increased support to the sector, the challenges typically faced by the creative industry are being resolved. Strong bank sector funding has been channeled towards instituting structured distribution systems such as cinemas and digital VOD platforms to ward off piracy and ensure that all potential revenue is locked in within the system.
Apart from funding the production of entertainment products such as movies, investing in the distribution and value chain is also critical for success. Bank lending towards the establishment of cinemas all around the country has been a critical factor to the increase of the supply of entertainment, making it more accessible to an even larger consumer base, especially those residing in the inner cities. The increase in supply of cinemas causes the price of attendance to fall, leading to more value for money for consumers. This greatly reduces the incentive to purchase these intellectual products illegally, reduces piracy, and ensures that artistes and producers are better rewarded for their work.
Factors such as piracy and peer-to-peer (p2p) file sharing are ultimately negative for the business and add to the unviability of the business of entertainment. As these leakages are plugged, and all revenue is captured, lending to the sector's expected spike even further.
Successes despite challenges
The feat achieved by the Nigerian creative sector has undoubtedly been accomplished through the help of the robust and sound financial infrastructure provided by the Nigerian banking system, which has allowed international donors and grantors such as the government to provide necessary assistance and interventions into the industry.
The introduction of structure and the resultant increase in funding to the sector has begun to yield results. In 2015, for the first time, Nollywood movies were under consideration for the Oscar awards. This gave it the opportunity to compete against 85 other countries for the Best Foreign Language Film Award.
More work, however, needs to be done on the part of creative enterprises to ensure that the growth of the sector is sustained, as DMBs remain committed to continue to extend funding partnership to one of Nigeria's growth sectors.
Written on behalf of Bankers Committee of Nigeria and the fourth article in a series that is focused on raising awareness around Nigerian banks' efforts. Importantly, it educates the public on opportunities available to help foster active participation in Nigeria's diversification efforts