Financing Of The Film Industry In Nigeria
(mondaq.com)
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:
- 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
- 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.
By: Peace Adeleye
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