There is no telling how much bigger Nollywood can get. Today, the Nigerian film industry is second only to Bollywood in the number of videos produced each year. Estimates for the market size are imprecise, but motion pictures & music production contributed $4 billion to Nigeria's 2016 GDP while older estimates suggest that Nollywood alone generates at least $600 million a year, providing more jobs than any private sector employer except agriculture.
Out of the Woods
Years ago, few would have thought this possible. Ignored by the government, the industry became notorious for its poor video quality, editing mishaps, and novel, abrasive approach to marketing. As the joke went, you could describe the plot of a movie once you came across its poster or trailer, but still have to wait till Part 4 to see the anticipated story unfold.
Despite this, Nollywood thrived – at home and abroad. According to the New York Times, the magazine partly responsible for the phrase "Nollywood", it "resonates with its stories of a pre-colonial past and a present caught between village life and urban modernity”. Undoubtedly, Nollywood drew viewers in with its stories – simple, revelatory, and relatable tales that depict the essence of modern Nigerian culture in constant conflict with its traditional roots. This was true, regardless of whether the plot of the movie revolved around love, power, or money.
Amid this, a narrative slowly formed: Nollywood was a thriving creative industry, perhaps Africa's most exportable vehicle of culture. But as an investment, Nollywood was an infantile, risky business.
This view is changing.
The emergence of 'New Nollywood' in the 2000s birthed a new profile of Nigerian movies. Films like ‘The Figurine’, ‘The Last Flight to Abuja', and ‘Mr & Mrs' identified a high-end segment of the market, unlocking new revenue streams for the industry.
All of a sudden, from 'Living in Bondage', the grandfather of Nollywood movies which was recorded with just $12,000, Nigerian films began to gross significant sums. 'The Figurine', Kunle Afolayan's 2009 blockbuster, grossed ₦30 million at the Box Office, a figure that now looks meek compared to 2016's 'The Wedding Party's' ₦450 million intake.
Crucially, all of these movies benefitted from the boom in Nigeria's cinema culture during the period, as well as increased interest from foreign film professionals eager to dive into Nollywood's unique environment.
The Value of Nollywood
Globally, movies are big business, generating nearly $100 billion in revenues in 2012. In the United States, it is the second largest export revenue earner after the aviation industry. And in Nigeria, the industry has steadily grown – by more than 10% each year from 2011 to 2015.
Belatedly, the Nigerian government has bought a ticket for the gravy train, recently identifying the creative sector as one of the priority areas in its Economic Recovery & Growth Plan. According to the policy document, the Federal Government (FG) is targeting a 15% annual increase in film production and $1 billion in export revenue from Nollywood movies by 2020. To do this, it highlights the need to improve intellectual property rights enforcement and incentivise sustainable channels for private sector investment.
The focus on enforcing intellectual property law is essential as piracy has long been a bane of Nollywood. According to the World Bank, for every legitimate copy sold, nine others are pirated. Even as stakeholders clamour for stronger anti-piracy laws, the reality is that, like most things in Nigeria, the laws are available, but enforcement is weak. Thankfully, digital technology, the aforementioned cinema culture boom, and sheer grit have enabled the industry to survive with piracy; but it is beyond reasonable doubt that this phenomenon continues to stunt growth and discourage investment in the sector.
At the moment, investment channels are few, though opportunities abound across the value chain of pre-production, production and distribution. Considering that the industry remains far from its potential peak, even with the recent growth, it ought to be an attractive investment destination, particularly in a country with relatively limited opportunities for saving.
Investing in Nollywood
So how exactly can you invest in Nollywood? Well, even if you are not interested in providing direct finance for a movie production, you can invest in distribution media like cinemas, online streaming, etc. In 2012, Tiger Global Management, a U.S.-based hedge fund, backed iROKOtv to the tune of $8 million. Since then, the company has reportedly secured funding up to $40 million.
For retail investors, mutual funds provide a simple avenue for investment. Currently, anyone can invest in the Nigeria Entertainment Fund. The fund works by pooling monies from different people and institutions interested in contributing to the growth of the sector. As much as 40% of the fund would then be invested in "debt instruments issued or guaranteed by any regulated financial institution which is targeted at the growth and development of the Nigerian entertainment industry and along its entire value chain".
Ideally, an entertainment fund would be 100% invested in the entertainment sector, but as this is a pioneer financial product, it represents a significant step forward in providing people with the access to financing Nollywood. Moreover, with a fund value of ₦1 billion, even 40% would represent a huge win for the industry.
There is no better time to invest in the Nigerian film industry than now. In the next few years, Nollywood may explode beyond anyone's forecast and those bold enough to take the punt will be smiling all the way to the bank.
And, in this story, that could be you.