Exploring Incentives for the Nigerian Creative and Entertainment Industry

Monday, November 22, 2021/08:18AM/by Rapheal Irenen of AELEX/ Header Image Credit: AELEX

Introduction

The Nigerian entertainment and creativeindustry has experienced massive growth over the last decade. According to theInternational Monetary Fund (IMF), the entertainment industry now accounts for1.45% of Nigeria's GDP[1].

In 2016, the Arts, Entertainment andRecreation Sector generated N239billion in revenue, culminating in about 2.3%of Nigeria's GDP for that year. Nollywood, which is the movie productionsubsector of the entertainment and creative industry, is globally recognised asthe second largest film producer in the world, coming behind America'sHollywood and ahead of India's Bollywood[2].The number of film production annually, stands at around 2500 with a projectionof US$22million by 2021 for total cinema revenue alone, while the total musicrevenue in Nigeria is estimated to rise to US$73million by 2021 (with acompound annual growth rate of 13.4%)[3].The entire industry currently employs about a million people and this number isexpected to increase before the end of 2021. Furthermore, it is also expectedto generate about $7 Billion for the national economy[4].

The popularity that the industry hasgarnered over the years has seen Nigerian artistes collaborating with theirforeign counterparts and striking multimillion-dollar music recording andpublishing deals with international record publishing companies such as SonyMusic Group, Universal Music Group, Warner Music Group, and a host of manyothers[5].

As a result of its successes in thelocal and international markets, in 2018, global streaming giant, Netflixacquired worldwide rights to Lion Heart, a Nigerian movie directed by GenevieveNnaji. In that same year, Netflix announced that it will be putting out $8Billion original budget to work in NigeriaÃ¢â‚¬â„¢s movie industry[6].In furtherance of this, in February 2020, Netflix made its official debut inNigeria, acquiring and distributing Nigerian filmed content[7].Since then, it has gone ahead to acquire several Nigerian movies, including the Wedding Party, Elevator Baby, Oloture,King of Boys, ItÃ¢â‚¬â„¢s her day and a host of others. Currently, Nigerian movieproducers are able to enter into publishing and streaming deals with Netflixfor their local content. Local movie streaming platforms have also emerged,with Iroko TV being a key player in this regard.

International award platforms arebeginning to recognise Nigerian acts, with the latest and most prolific beingBurna Boy's consecutive Grammy nominations in 2019 and 2020 for his albums African Giant and Twice As Tall, and asubsequent win in 2021, for the later album (Twice As Tall).[8] In recent times, more of the award categoriesand nominations allotted to African music at the Black Entertainment Television(BET) Awards, the Music Television (MTV) Awards, the Grammy Awards and even theNetherlands' Eddison Awards[9],have been clinched by Nigerian artistes. Furthermore, Nigerian artistes arebeginning to garner massive streaming numbers on various international musicstreaming platforms like Spotify, Apple Music, Audiomack, Youtube and Boomplay[10].Local music streaming platforms like UduX and Gbedu have also emerged. These developments suggest thatNigerian artistes and their songs are beginning to have a considerable space inthe world music scene.

Challengesand the Way Forward

Despite the level of growth that thesesectors have experienced, it has been beset by lack of funding, piracy,copyright infringement, amongst other issues currently plaguing it. The sectorbarely receives support from the government and investors (despite being madesubject to various taxes and levies by the various tiers of government). As aresult of this, investors are hardly keen on investing in this sector.

In a bid to support the entertainment industryin 2010, Former President Goodluck Ebele Jonathan at the 30^thAnniversary of Silverbird Group announced a $200million donation to supportNollywood[11]. Thesum was to be distributed to the players in the sector in form of loans, and itwas to be administered by the Nigerian Import and Export Bank (NEXIM Bank) andthe Bank of Industry (BOI).

Similarly in 2012, at the 20^thanniversary celebration of Nollywood, another announcement of a N3billion granttagged "Project Nollywood", was also made by Former President Goodluck EbeleJonathan and it was supposed to be managed and distributed by the Ministry ofFinance in collaboration with the Ministry of Culture and Tourism[12].

However, how these support funds wereutilized remains undetermined as several Nollywood stars have stated that theydid not receive the said funds as promised[13].Along the same lines, the BOI in 2015 denied receiving the $200 Milliondonation from the former president[14].

In a similar vein to contribute to theentertainment and creative industry, the BOI initiated a N1billion specialfacility for Nollywood, known as "the BOI Nollyfund". The intervention wasinitiated by BOI for the following reasons.

Nollywood is a very important emerging sector in the economy.
It contributed 1.42% ($7.3 billion or N1.4 trillion) to Nigeria's Re-based GDP in 2013.
It has contributed to enhancing the image of Nigeria as Nollywood movies are being watched globally.
Nollywood is now ranked 2^nd in the world after Hollywood (America) and ahead of Bollywood (India) in terms of the number of contents produced.

However, the terms and conditions foraccessing the funds appears to be quite strenuous. These conditions include theassigning of copyright as collateral for receiving the funds and therequirement for a distributor to issue an undertaking to remit all cinemaproceeds of the film based on agreed arrangements, to BOI designated banks.[15]These conditions amongst others appeared to be unpleasant to the industry practitioners.

Interestingly, the currentadministration is also taking steps to contribute to the creative sector. Thisis being achieved in collaboration with the African Development Bank ("theAfDB") through a $500million facility ("the Facility") for the tech andcreative sectors. This initiative will see the injection of the said Facilityinto the aforementioned sectors, before the end of 2021.[16]Accordingly, arrangementis already being made for the Facility to be utilized through the NigeriaInnovation Programme (NIP), which was proposed by the federal government toboost innovation and job creation, and to foster growth in the technology andcreativity entrepreneurship ecosystem.[17]It is excepted that this facility will be bring about further development tothe already booming creative industry.

Pioneer Status Incentives

It is however important to note thatthere are other ways in which the government can support the entertainmentindustry apart from making and establishing donations and support facilities. Amajor way in which the government can make the entertainment industryattractive is in the provision of various incentives to the entertainment andcreative industry.

As a matter of fact, in 2017, theFederal Government included the creative sector on the pioneer status incentivelist, as a way of contributing to its development. Pioneer Status Incentive("PSI") is a tax holiday incentive provided for under the Industrial DevelopmentIncome Tax Relief Act ("the Act"). It grants qualifying industries and theirproducts relief from the payment of corporate income tax for an initial periodof three years, which is renewable for another one or two additional years.

Section 1 of the Act provides that anyindustry may be designated as "pioneer" wherethe president is satisfied that it is not being carried on in Nigeria on ascale that is suitable to the economic requirements of Nigeria or at all, orthere are favourable prospects of further development in Nigeria or it isexpedient and in public interest to encourage the development or establishmentof such industry in Nigeria by declaring the industry to be a pioneer industryand any product of the industry to be a pioneer product.

It is indubitable that tapping intothis is beneficial for the entertainment and creative industry as the PSIcovers the following:

production of digital movies
animation, videos, television programmes, commercials(including online distribution and Exhibition)
Music production, publishing and online digital musicdistribution
production of Cameras, motion picture and slide projectors,overhead transparency projectors
photograph for tourism purposes and aerial photography.

To this end, any organisation engagedin any of the aforementioned business is required to apply to the NigerianInvestment Promotion Commission ("NIPC") for a Pioneer Status Certificate(PSC), in order to enjoy the PSI.

This is a positive step because asearlier noted, the qualifying media and creative practitioners are entitled torelief from the payment of corporate income tax at 30%, for an initial periodof three years which is renewable for one or two additional years.Consequently, this may aid in reducing the cost of doing business for theseentertainment and media practitioners. Furthermore, it will make the entireindustry attractive to foreign and local investors.

Though the inclusion of the creative andentertainment industry on the pioneer status list demonstrates the FederalGovernment's willingness to support the entertainment and creative sector,there are however certain drawbacks that must be considered.

First, the service fees for theapplication for a PSI in Nigeria appear to be exorbitant. Applicants arerequired to pay an application fee in the sum of N200,000 (Two Hundred Thousand Naira), then a service chargedeposit of N2,500,000 (Two Million,Five Hundred Thousand Naira) is also required to be made. In addition, 1% ofthe actual pioneer profits will be paid annually and due diligence fee of N500,000 (Five Hundred Thousand Naira) isrequired to be paid. In case of arenewal, an application fee of N100,000(One Hundred Thousand Naira) is required to be paid and 1% of the actualpioneer profits will be paid annually.

The primary drawback with these chargesis that the small players in the creative and entertainment industry may not beable to access these incentives and this may defeat the essence and purpose ofit.

Secondly, the processing time for freshapplications often take up to twenty-five weeks, while an application forrenewal/extension takes an average of fifteen weeks to finalise. This isbarring any delays that one may experience with the applications.

This inordinate delay experienced inobtaining the PSC serves as a drawback and barrier as it makes it extremelydifficult for practitioners to access this incentive. Some may consider thelevel of strain involved and simply call off the desire to obtain a PSI.

Consequently, we opine that thegovernment must take reasonable steps to ensure that the PSI is obtainable at aconvenient cost while putting the small players in the entertainment andcreative industry into consideration. The government must also consider placingthe entertainment and creative sector under the investment tax credit incentivewhich is available in other sectors. This will give investors the impetus toconsider investing in the entertainment and creative sector.

Furthermore, just like the TourismIncentive and the Agricultural Production Income Tax Exemption, the governmentmust begin to consider entertainment and creative industry-based incentive.This is already obtainable in the United States of America where movieproducers are entitled to the movie production incentives[18].

Conclusion

The contribution of the entertainmentindustry to Nigeria's economic and social growth cannot be underestimated. Theindustry has been responsible for the creation of over a million jobs and it isstill creating more jobs for Nigerians; albeit the sector barely enjoys supportfrom investors and from the government.

If the entertainment industry is ableto get the adequate support it needs, it is indubitable that the quality ofcontent(s) being produced and released yearly will improve. Fortunately, thissupport is not limited to the provision of grants and loans as the governmentcan also explore other means like the provision of various incentives to theindustry.

Hence, the issues pertaining to theapplication for PSI must be addressed and the government must also seek toestablish an entertainment & creative industry-based incentive as well asinclude the entertainment & creative industry on the list of sectorseligible to access the investment tax credit incentive.

Footnotes

1. International Trade Administration, Department of Commerce,United States of America "Nigeria- Mediaand Entertainment", October 13, 2021 (https://www.trade.gov/country-commercial-guides/nigeria-media-and-entertainment-industry-nollywood-and-nigerian-music).

2. Femi Osinubi "Spotlight- the Nigerian Film Industry by PWCNigeria" 2017 (https://www.pwc.com/ng/en/publications/spotlight-the-nigerian-film-industry.html#:~:text=The%20Nigerian%20Film%20Industry%20(Nollywood,Product%20(GDP)%20in%202016).

3. Ibid.

4. Femi Osinubi, "The Business of EntertainmentHarnessing growth opportunities in entertainment, media, arts and lifestyle" October 2017 (https://www.pwc.com/ng/en/assets/pdf/the-business-of-entertainment-final.pdf).

5. The likes of WIzkid and Davido are currently signed to RCARecords, while Burna Boy is signed to Warner Bros and Atlantic Records.

6. Yomi Kazeem "Netflix is finallyputting its $8 billion original production budget to work in Nigeria'sNollywood movie industry" September 10 2018(https://qz.com/africa/1384217/netflix-buys-nollywood-movie-lionheart-by-genevieve-nnaji/)

7. Ibid.

8. Jayne Augoye "Burna Boy bags second Grammy nomination" November 24 2020. (https://allafrica.com/stories/202011250013.html)

9. In December 2020, Burna boy became the first Nigerianartiste to win the Dutch Eddison Awards, winning the category for Best WorldAlbum with his 2019 released album, African Giant.

10. In aweek of release, Made in Lagos byWizkid broke several African streaming records. It became the first African album to debut onthe Spotify Global Album chart, and within the top ten at that. Furthermore, inNine days of release, it surpassed 100 million streams across five platforms, this was a huge milestone andrecord for Afrobeats.

11. Alex Eyengho "Jonathan's $200m intervention fund!", June 30 2012. (https://www.vanguardngr.com/2012/06/jonathans-200m-intervention-fund/

12. Akarabox "Nollywood gets a Boost with N3 Billion grant from NigerianGovernment", 2012. (https://akarabox.wordpress.com/2013/03/03/nollywood-gets-a-boost-with-n3-billion-grant-from-nigerian-government/amp/)

13. In a publication by PMNews.com, Nollywood Veteran, ClarionChukwurah called out the former president for not fulfilling its promise to themovie industry.

14. In a publication made by Premium Times Newspaper on itsofficial website, on August 18 2015, the Bank of Industry denied receiving the$200Million Nollywood fund.

15. Bank of Industry "Nollyfund", 2020 (https://www.boi.ng/boinollyfund/)

16. Vanguard News "FG activates N240bn ADB facility for tech, creative sectors" April 6 2021 (https://www.vanguardngr.com/2021/04/fg-activates-n240bn-adb-facility-for-tech-creative-sectors/

17. PremiumTimes "Nigeria, AfDB setting up $500million fund for tech,creative sectors Ã¢â‚¬â€œ Presidency", April 15 2021, (https://www.premiumtimesng.com/business/business-news/453262-nigeria-afdb-setting-up-500-million-fund-for-tech-creative-sectors-presidency.html

18. Wikipedia "Movie Production Incentive in the United States" (https://en.wikipedia.org/wiki/Movie_production_incentives_in_the_United_States)