It is with a sense of humility and responsibility that I stand before this very distinguished audience, to speak on the topic “POSTCOVID-19 FUNDING POLICY FRAMEWORK PARTNERSHIPS BETWEEN THE FEDERAL CAPITAL TERRITORY ADMINISTRATION (FCTA) AND THE NIGERIAN FILM CORPORATION (NFC), FOR THE NIGERIAN FILM INDUSTRY THROUGH REBATES, LOCATION INCENTIVES, TAX CREDITS AND FILM GRANTS’’. At this point, I want to take a moment to put on record, my profound appreciation for the honour of the keynote speaker for this august gathering.
Without a doubt, the Covid 19 pandemic has taken a toll on countries, global economics, industries, families and individuals the world over and has left us with the “new normal” of sanitizing our hands, door handles, table tops and other infectable surface. It has also given us new behavioral patterns, such as wearing nose masks of different sizes and patterns and being careful about randomly touching our eyes, noses and mouths. While thanking the Almighty for sparing our lives, life most go on and that is what has necessitated the topic for yet another edition of the Zuma Film Festival (ZUFF) Lecture. However, for us to do good justice to this subject under discourse, we all must be on the same page as per some of the conceptual terms which would be discussed better in the course of this lecture. These concepts include but are not exclusive to funding sources, partnerships, incentives, credits, grants and rebate.
It indeed, gladdens the heart
when we read or hear firstly that “The Nigerian film industry has attracted
global attraction, and is third only to America’s Hollywood and India’s
Bollywood; making it an investors delight, or secondly that in 2016, the
Nigerian film industry was recognized as the largest film producer in the
world, with an estimated contribution of NGN 239 billion or 2.3% of the Gross
Domestic Product. As a result of these successes in the Local and International
Markets, in 2015 the global streaming giant Netflix also announced it will be
putting out USD 8 Billion to work in Nigeria’s movie industry.
Sadly, this hasn’t always been
the case, and that brings us to the concept of funding sources or simply put
where the monies invested in the Nigerian film industry had come from, is
coming from and will come from. To get a proper historical undertone of the
production funding in Nigeria we will consider the position of Afolabi
Adesanya, a one-time Director General of the Nigerian Film Institute/film
corporation, as this will set the tone on the funding metamorphosis which the
Nigeria film industry has come to bear with after more than three decades of
productive outings with corporate organizations. Adesanya submits that money or
funding and its purchase power is an essential commodity for film making. In his
bid to explain the enigma called funding, Adesanya enthused that, if the local
producers are committed to the course of a market driven film ethos, there was
so much to be achieved.
He
vividly recalled the epic sojourn of the Nigerian Film Industry when it went to
the stock exchange market and notes that Francis Oladele, popularly known for
Kongi, Bullfrog and other movies, was able to successfully raise NGN 3Million
to produce Oju Aiye (Eye of the World from IMB securities (a subsidiary of
IMB). He further explains that four major considerations were at play then.
First was the fact that 1986 was the peak of indigenous cinema in local film
history, so much momentum had built up to this daring move to source funding,
openly. Secondly, it clearly demonstrates the confidence and trust of the
Nigerian audience which had so much faith in the local content produced then,
that they subscribed to the funding of Oju Aiye. Thirdly the concept of “Crowd
Funding” was seriously at play here and showed to the world that Nigerians were
patriotic in their demand for homemade entertainment. Fourthly, the confidence
reposed in the Calpenny Film brand by the financial sector also showed that so
much collaboration was actually possible between indigenous companies, in this
case filmmakers and financial proprietors.
Before the novelty of the
romance between the film industry and financial proprietors, Lancelot Oduwa
Imasuen, a major Nigerian movie producer, Afolabi Adesanya and others had
identified the following funding sources for our film industry.
A. Founder’s
funding- this is a situation where the story writer, the script writer and
producer are often one and the same person, who uses his/her personal funds
saved over the years or gathered by the careful liquidation of assets to
produce movies
B. Man-Know-Man
- as stated in local parlance here simply means harnessing or leveraging on the
persons (connections) you have to raise the very necessary funds to produce
movies. This is done either by getting these connections to catch your visions
and key into it financially or by getting these connections to loan you the
money with which to finance these films
C. Angel
Funding – Angel investors are individuals who have available funds and are
ready to invest in an entrepreneur’s ideas. They are professional investors who
specialize in investing. According to Samoylora A. (2021), Angel funding is the
most important source of funding for start-ups because they generate useful
resources to start-ups. Freear et al, opine that Angel funding falls between
informal funding, such as founder funds, family and friends (known locally as
Man know Man), and venture capital which boosted the production of Oju Aiye and
others for instance.
D. Crowd
Funding – As the name suggests, Crowd Funding is the funding by a crowd. Crowd
Funding according to Michel Harms can be used for a variety of purpose e.g
group purchase (cooperative) political campaigns disaster relief, starting up a
business and support or sustaining the creative industry, Harms posits that
Crowd Funding has proven successful because it uses the proven mechanism of
crowd sourcing.
All of
the above attempts at seeing and utilizing the much-required funding for the
Nigerian film industry has actually brought us out of the proverbial doldrums
and have set us (our film industry on the enviable pedestal as NO 3 worldwide after
Hollywood and Bollywood. However, despite the level of growth experienced and
enjoyed by this industry, we cannot shout UHURU yet, because it is still beset
by serious lack of funding, piracy, copyright infringements and other issues.
These issues are the “Unstructured nature” of funding for the film industry
which have been brought to the limelight by professionals like Lancelot Imasuem
and others. In a bid to turn the tide, the Goodluck Jonathan administration, in
2012, at the 30th anniversary celebrations of the Silverbird Group,
announced USD 200 million donations to support the industry. These funds were
to be distributed to industry players in the form of loans and was to be
administered by the Nigerian Import and Export Bank (NEXIM) and the bank of
Industry (BOI). Again in 2021, while celebrating the 20th
anniversary of Nollywood, another announcement was made, this time it was a
grant of NGN 3 billion; which was to be managed and distributed jointly by the
Ministry of Culture and Tourism. Unfortunately, however, the whereabouts and
the utilization of these support funds have remained undetermined as major
players have repeatedly stated that they never received the funds and one of
the administrating banks, the Bank of Industry (BOI) has denied receiving such
funds.
In a
much more positive turn of events, and since the government isn’t the only
“corporate entity”, two major Nigerian banks several years later pitched their
hats into the fray. Access bank Plc and the Bank of Industry came up with the
NollyAccess loan and the BOI NollyFund respectively. In separate yet similar
statements, while announcing and establishing these facilities, both banks
summarized their reasons as follows:
1. Nollywood,
which has come to stay, is a very important emerging sector in the economy.
2. Nollywood
in 2013 contributed 1.42% (USD 7.3 billion or NGN (1.4 trillion) and in 2016
contributed 2.3% (NGN 239 billion) to Nigerian Re-Based GDP,
3. Nollywood
has contributed immensely in enhancing the image of Nigerian as our movies are being
watched globally.
4, Nollywood is now
ranked 2nd in the world after America’s Hollywood, having over-taken
India’s Bollywood in terms of the number of contents produced.
This I must say,
is no easy achievement, considering all that goes into producing one movie.
How well these facilities have
been accessed and utilized is a story for another day, though quite available
in the public space. Interestingly enough, with this current administration led
by President Muhammed Buhari taking positive steps to contribute to the growth
and sustenance of this sector, we can say there is light at the end of the
tunnel. These steps are being achieved in collaboration with the African
Development Bank (AFDB) through a USD 500 Million facility. This laudable
initiative was scheduled to see the injection of this facility into this sector
by the end of 2021 through the Nigerian Innovation Program (NIP) which proposes
to boost innovation, job creation and foster growth in the technology and
creative entrepreneurship ecosystem. It was expected, and I am glad to say that
this facility is bringing about further growth and sustenance to the already
booming Nigerian film industry.
The way forward I must say is
not rocket science, but lies in the tested and trusted cliché that “what is
good for the goose is good for the gander”!
With the return to democracy in 1999, several waivers, grants, tax
holidays, rebates and incentives were given to the likes of Dangote Group and a
lot of other super industrialist, who embraced all these and have been waxing
very strong from available statistics. It therefore becomes very logical for us
to try these same measures which have worked in the agricultural, manufacturing
and other sectors and see if they would also succeed in the creative industry
sector.
The way forward I must say is
not rocket science, but lies in the tested and trusted cliché that “what is
good for the goose is good for the gander”!
With the return to democracy in 1999, several waivers, grants, tax
holidays, rebates and incentives were given to the likes of Dangote Group and a
lot of other super industrialist, who embraced all these and have been waxing
very strong from available statistics. It therefore becomes very logical for us
to try these same measures which have worked in the agricultural, manufacturing
and other sectors and see if they would also succeed in the creative industry
sector:
1.Pioneer
Status Incentives (PSI): This is a tax holiday incentive provided for, under
the Industrial Development Tax Relief Act. It grants qualifyingindustries
and their products relief from payment of corporate income tax for an initial
period of three years, which is renewable for another one or two additional
years. In section 1 of the Act, there is the provision
"that
any industry may be designated as a “pioneer” where the President is satisfied
that it is not being carried on in Nigeria on a scale that is suitable to the
economic requirements of Nigeria or at all, or there are favourable prospects
of further development in Nigeria or it is expedient and in public interest to
encourage the development or establishment of such industry in Nigeria by
declaring the industry to be pioneer industry and any product of the industry
to be a pioneer product”,
The PSI covers the following :-
A, Production
of digital movies,
B, Animation,
videos, television programmes, commercials (including online distribution and
exhibition),
C, Music
production, publishing, and online digital music distribution.
D, Production
of cameras, motion picture and slide projectors, overhead transparency
projectors.
E, Photography
for tourism purposes and aerial photography,
2. The
creation of a film industry development fund to be listed in the 5th
Schedule of the CITA Cap C 21, Laws of the Federation of Nigeria (LFN)
as amended. Though this has been there since 2004, It is unfortunate that lip
service has been paid to it over the years.
3.
Income Tax Exemption. This is succintly captured in Decree No 32 of 1996, and provides
that 100% of the foreign income earned abroad by playwrights, artistes,
musicians and sportsmen and women etc be exempted from tax provided that the
income is repatriated into Nigeria in foreign currencies through a domiciliary
account with a Nigerian bank. Our sportsmen and women (particularly our
footballers) authors, and playwrights have been enjoying and benefitting from
this over several years, so why not Nollywood?
4.
Location Incentives: This provides for a tax reduction of about 30% for
enterprises located in areas that are 20 kilometers away from electricity,
portable water and tarred roads,
5.
Waiver on the importation of foreign materials required for local film
productIons.
6.
Deduction of reserve made-out profit for research and development.
7. Low
Company Tax of 20% for small companies in this sector, as per 1996 fiscsal
policy analysis.
8. Low
Tax Treaty Concession rate of 7.5% for foreign investors. This could just see
Hollywood Producers making Nigerian content movies.
9.
Loss Relief: To cushion the margin of loss when a film “goes burst” in the
industry’s parlance.
10. Allowable
deduction of the cost of film production.
11.
Audio-visual film materials imported into Nigeria to be exempt from VAT.
12.
Insertion of “film practitioners” in the list of economic actors mentioned in S19
(1) of PITA 2004 Third Schedule, Item 30.
13. Preferential
Loan Facilities to be made available to investors to aid development in the
film industries.
In the real sense, the film industry needs a better understanding of the
tax laws and how they apply to the industry, and this administration is leaving
no stones unturned to ensure that the tax environment is investment friendly.
Globally, an investor friendly tax environment will certainly attract foreign
investment because the tax incentives available within a nation’s tax environment
constitute veritable opportunities for local and foreign investors to build on.
I wish to put on record that
in the Nigerian business environment, the tax environment has impact on
employment, output, income and economic growth rate, making it imperative that
regulators and stakeholders not only play their critical roles, but play it
very well.
While thanking you very much
for listening, I want to conclude by reiterating the fact that the contribution
of the entertainment industry, particularly the Film Sector to Nigeria’s
socio-economic growth cannot be over-emphasised and certainly should not be underestimated.
The industry has been responsible for the creation of over a million jobs and
it is still creating more jobs for Nigaerians, although the sector barely enjoys
support from investors and from government. If the entertainment industry is
able to get the support it requires, then we can be certain that the quality of
the movies produced and released annually will improve. Fortunately, this
support is not limited to the provision of grants and loans, but other means
like the provisions of various incentives which we had mentioned earlier.
Based on the foregoing, the signing of the MOU is quite a
significant step in the right direction. The next two step would necessarily be
the proper understanding and the right application of those already identified
incentives. The Nigerian Film Corporation and the entire Nollywood Industry
should make haste and take advantage of the readiness of the Federal Capital
Territory Administration (FCTA) to partner with major stakeholders and players
to ensure that the FCT becomes the next filming location and a worthy rival to
Lagos, Enugu and Delta states.
Once again. Thank you for listening, make yourselves at
home in our nation’s capital and may the Almighty guide and protect you.
1.
guardian.ng/news/nfc/nan 28 November, 2021 by
8:54 am : NFC,FCT Sign N2.5 bn MOU for Zuma Film Festival
2.
Premium Times : June 30, 2017 Nigerian Govt
gives Nollywood extra N420 million grant.
3.
Peace Adeleye : Nigeria: Financing of the Film
Industry in Nigeria
4.
Harms M (2007) www.crowdfunding.de/wpcontent/.../crowdfunding-masters-theses-Michael-Harms
5.
Hutchinson R.W (1995) : The Capital Structure
Decision of the Small Dinner Firm : Some Exploratory Issues in Small Business
Economics (76) www.jimsjournal,org
6.
Femi Osinobi : Spotlight – The Nigerin Film
Industry by PWC Nigeria 2017
(https://www.pwc.com/ng/en/publications/spotlight-the-nigerian-film-industry.intrn/#