Achieving the promise of African cultural exports A case study on Nigeria
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A Discussion Note AFTFP June 2010
Acknowledgements The team that prepared this paper was led by Ismail Radwan (Lead Economist AFTFP) and included Pierre Strauss (Economist) and Chioma Nwagbosa (Consultant).
Preface Contents Acknowledgements ............................................................................................................ 2 Preface ................................................................................................................................ 2 Executive Summary........................................................................................................... 4 Chapter 1 : The youth hold the key to the continent’s future. ...................................... 5 Youth represents a demographic opportunity for Africa ................................................. 5 The challenge of making the youth work ........................................................................ 6 Chapter 2: Creative economy for development .............................................................. 8 When culture jibes with economic success ..................................................................... 8 A surge in exports of creative goods from developing countries .................................... 9 African creativity capacities remain unexploited .......................................................... 10 Chapter 3: Nollywood today ........................................................................................... 11 The prolific entertainment industry in Nigeria .............................................................. 11 Piracy a scourge of the Nigerian film and music industries .......................................... 12 An archaic production, distribution and marketing value chain.................................... 13 Lack of technical skills, branding and access to financing............................................ 15 Chapter 4: The irresistible potential of Nollywood ...................................................... 16 The non oil sector in Nigeria is driving growth ............................................................ 16 The surge of Nigeria movie production......................................................................... 17 Nollywood’s role in Nigerian economy ........................................................................ 17 Chapter 5: Conclusion and recommendations.............................................................. 21 Enforce copyright protection and assure law enforcement ........................................... 24 Structure the value chain of the movie industry ............................................................ 25 Provide the industry with direct financing for development ......................................... 26 Bibliography ..................................................................................................................... 27
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Table of figures Figure 1 : Africa features the highest poverty rate (US$1 per day) .................................... 5 Figure 2 : Youth African labor force represents Africa most precious asset ...................... 6 Figure 3 : Africans are asking their governments’ to focus on creating jobs ...................... 7 Figure 4 : A typology of creative industries ........................................................................ 8 Figure 5 : Considerable increase in exports of creative goods ............................................ 9 Figure 6 : Exports of creative goods come mainly from developed economies................ 10 Figure 7 : A value chain characterized by fragmentation of the film industry .................. 14 Figure 8 : The future of Nigeria’s is in the non oil economy ............................................ 16 Figure 9 : Nigeria experiences a surge in film production ................................................ 17 Figure 10 : The movie industry could contribute significantly to the Nigeria GDP ......... 18 Figure 11 : Nollywood has a great potential in terms of exports revenue ......................... 18 Figure 12 : The difficulties for Nollywood to capture movies revenue ............................ 19 Figure 13 : A typical consumer basket in a developing country. ...................................... 20 Figure 14: Nollywood needs reform while creating youth employment .......................... 21
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Executive Summary Africa’s cultural heritage is immense and the considerable opportunities offered by the African creative economy have not been harnessed yet. Indeed, the lack of copyright, intellectual property rights and poor enforcement as well as more pervasive market failures often prevent the full exploitation of cultural assets by its creators. Currently Africa’s share in global trade of creative product remain limited at less than 1 per cent of world export but sound policies and targeted investments in this sector can have a significant impact on poverty alleviation through the creation of job for the youth. Africa’s youth hold the key to the continent’s future. Indeed the youth (below 24 years old) make up more than half of most African population. However although they account for only a third of the workforce they account for almost two-thirds of the unemployed. It is critical to highlight that the unemployed youth should not be considered as a burden but rather as a tremendous productive asset whose considerable skills and hidden talents can stimulate the African economy. Creative industries such as the music and entertainment are among the most dynamic sectors in world trade. Indeed over the period 2000-2005, international trade in creative goods and services experienced an unprecedented average annual growth rate of 8.7 per cent and can play a critical role in youth employment in Africa. However, African countries are not yet able to harness their creative capacities. The Nigerian Film industry offers a very good example how a creative industry, can promote growth in Africa while providing youth with job opportunities. Euphemistically known as “Nollywood”, it is the most prolific in the world producing no fewer than 40 new movies every week and the third largest movie industry in the world by value ($250 million). It is estimated that the Nigerian industry provides up to one million job opportunities both directly and indirectly. Despite remarkable achievements, the industry remains unstructured and loosely regulated. Production standards remain low, marketing and distribution linkages are at best ad hoc and access to finance remains extremely limited. There are few global linkages and a strong need to improve quality at all stages of the value chain Piracy is rampant making it difficult for producers to recoup their costs. Until the industry can capture a greater proportion of the revenue stream it will be consigned to making lowbudget, low-quality productions and will not have the ability to scale-up its operations and provide a larger number of well-paid jobs. The paper analyses the modern Nigerian film industry revealing how various market failures and coordination issues have resulted in a sub-optimal equilibrium. It also outlines a number of steps that can be taken by the Nigerian authorities and private sector stakeholders to develop the industry to its full potential unleashing great prospect for job 4
creation in the entertainment sector which can then contribute to address the critical issues of youth unemployment.
Chapter 1 : The youth hold the key to the continent’s future. The energy, skills and aspirations of young people are invaluable assets that no country can afford to squander. – World Bank, World Development Report 2007. Youth represents a demographic opportunity for Africa
Africa is the world’s youngest continent with more than 65 percent of the population under the age of 30. The youth1, those between the ages of 12-24 number around 260 million, a figure that is expected to double by 2045. These figures are unprecedented in human history. Never before have so many young people been alive at the same time and given the ongoing trends in fertility such a situation is unlikely to occur ever again. If the demographic transition to smaller family sizes that is slowly gathering momentum on the continent continues, Africa will see a prolonged period of several decades during which its working age population will have a small number of dependents. Other countries most notably in Asia have managed to turn this transition into a “development miracle” focusing on family planning, education of youth (especially females), improving skills and productivity of the workforce and creating a conducive environment for entrepreneurs in the private sector. However, this virtuous circle has not yet been established in Africa. Figure 1 : Africa features the highest poverty rate (US$1 per day)
Source: World Bank
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Since there is no generally accepted definition of youth this report adopts that used in the World Bank World Development Report 2007: Development and the Next Generation. It should be noted that the United Nations defines youth as the 15-24 age group while individual countries have adopted ranges from 6 to 40 years.
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Accounting for 37 percent of the working-age2 population, the youth nevertheless make up 60 percent of the unemployed. Almost ¾ of the youth live in poverty subsisting on less than US$2 per day.3 The youth’s most abundant asset is their labor and yet it is not being put to good use: 3 out of 5 of the continent’s youth are out of work. Young people are a potential source of growth and social development if gainfully and productively engaged. But they could also become a source of devastating social tension and conflict if they are marginalized.4 The continent has already witnessed the devastation of conflicts partly brought on by disenfranchised youth in Sierra Leone, Rwanda, Nigeria, Liberia and Cote D’Ivoire. Figure 2 : Youth African labor force represents Africa most precious asset
The challenge of making the youth work
Unemployment of Africa’s youth is already a huge challenge but if not tackled now it will only grow in the future. Youth unemployment has steadily worsened over the years. It is estimated that of the 8-10 million new entrants to the labor market less than 1 in 10 find wage employment in either the formal or informal sector. African economies, wrapped in red tape and stymied by bureaucratic obstacles, are not able to create sufficient jobs to keep up with the rate of population growth (2.5 percent). This is true even when they are able to grow rapidly for sustained periods of time. The jobs that do exist are often found in family agriculture or the peri-urban informal sector. 2
The working age population is defined as those between 15-64 although it is noted that child labor is a reality for many African children between the ages of 6-14. 3 Africa Development Indicators 2008/09 4 Youth and Employment in Africa, UN Economic Commission for Africa, Addis Ababa September 2002.
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Successfully addressing youth unemployment in Africa implies recognizing the tremendous dominance of the informal sector. In general, jobs for youth are characterized by insecure work arrangements, low productivity and meager earnings.5 Improving the business climate will encourage more formal enterprises to start-up but this process will take time and a successful youth employment strategy will therefore have to address the reality of the informal sector and develop approaches such as “natural clusters” that are closely aligned to the needs of the informal sector (see below). Africans are clearly demanding government support for job creation. The challenge for African policy-makers and donor partner institutions is to identify the policies that can create massive employment for the youth. It is not surprising then that the issue of youth unemployment has not yet been solved in Africa. It demands short-term and long term remedies that cut across the traditional boundaries and remits of relevant government ministries and departments. It requires matching efforts on the demand and supply sides, working with the formal and informal sectors and bridging the gulf between academia and industry. Figure 3 : Africans are asking their governments’ to focus on creating jobs
Source: Globescan survey of 10,000 Africans in 10 Countries, 2006
To address youth unemployment it is first to critical to identify sectors having a particular potential in terms of growth and employment. Then it is required to carry out reforms to improve the general business climate of this specific sector while doing targeted investments. In this sense, the next chapter will discuss how the so called creative industries can potentially trigger growth and therefore foster youth employment in developing countries. Indeed today creative industries are among the most dynamic 5
Youth Employment in Africa – unpublished note prepared by Harold Alderman 2009.
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sectors in the world trade. Over 2000-2005, international trade in creative good and services experienced an unprecedented average annual growth rate of 8.7% and more strikingly developing countries exports of related creative goods increased by 143% between 1996 and 2005.
Chapter 2: Creative economy for development The creative economy has the potential to generate income and jobs while promoting social inclusion, cultural diversity and human development – UNDP, Creative Economy Report 2008. When culture jibes with economic success
The concept of the creative economy is recent and still evolving. It reflects the idea that creative assets can generate economic growth, job creation and export earnings while at the same time promoting social inclusion, cultural diversity and human development. For too long, the development dimension of the creative industry has been neglected and it is only recently that the potential of exports of creative goods has been recognized as a trigger for growth and poverty reduction in developing countries. Indeed the creative economy opens up new opportunities for developing countries to leapfrog into high growth sector of the world economy and increase their participation in global trade. UNDP has developed a formal classification of the creative industries comprising four groups, taking into account their distinct characteristics. These groups are the following: Figure 4 : A typology of creative industries
Today, creative industries are among the most dynamic sectors in world trade. Over the period 2000-2005, international trade in creative goods and services experienced an unprecedented average annual growth rate of 8.7 per cent. For instance the value of world exports of creative goods increased markedly during the period 1996-2005, with the total
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value reaching $335.5 billion in 2005. This upward trend is likely to continue throughout the decade, given the positive prospects for global demand. Figure 5 : Considerable increase in exports of creative goods
Sources: UNCTAD
A surge in exports of creative goods from developing countries
Until recently OECD countries have dominated both export and import flows. However year after year developing countries have increased their share in world markets for creative products and their exports have risen faster than those from developed countries. The exports of creative goods from developing economies accounted for 20 per cent of world exports of creative goods in 1996 but reached 42 percent in 2005. Developing-country exports of related creative goods increased by 143 per cent over the period 1996-2005 from $56 billion to $136 billion. For instance exports from the music industry jumped latterly from $222 to $1,412 million. However, this significant growth includes and reflects the remarkable increase in production and trade of Chinese creative goods which account for 19% of the total export flow. Indeed, China became the world’s leading exporting country of creative goods in 2005 benefiting from greater competitiveness of these creative good and services in world market over the last decade. This spectacular trend in growth is indicative of the catching-up strategies being pursued in a number of developing countries. The increase in the export performance of China over the ten year was remarkable, from $18.4 billion in 1996 to $61.3 billion in 2005. Asian economies accounted for more than three quarters of total exports of creative goods from economies of the South. In Latin America and the Caribbean, exports of creative goods more than doubled from $3.5 billion to $8.6 billion mainly due to Mexico performance and which rank among the top ten exporters in the world.
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Figure 6 : Exports of creative goods come mainly from developed economies
Sources: UNCTAD
African creativity capacities remain unexploited
African developing countries have not been able to realize their full potential and remain marginal player in the world markets for creative goods and services. Africa’s share in global trade of creative products remain limited at less than 1 per cent of world export since the great majority of creative and cultural production takes place in the informal sector for which statistics are non-existent. However growth in demand for creative African products is increasing and can therefore contribute to growth and poverty alleviation on the continent. African exports of creative goods increased indeed from $973 million to $1.8 billion during the period 2000 – 2005. The absence of African countries in the list of major player in the creative industry reflects a combination of domestic policy weaknesses and obstacles at global level. Domestically, policies are needed to enhance the capacity of exportable creative goods and services. Further at international level, obstacles include lack of access to markets and non-competitive business practices. The concentration of marketing channels and distribution networks in a few major markets, limited funds for creative industries from regional and multilateral creditors and technological exclusion jeopardize the competitiveness of creative products and services from developing countries. The difficulties experienced by Africa to release it creative potential can be illustrated through the case study of the Nigeria movie and music industry. Nigeria’s story and the characteristic of its entertainment industry shed the light on the main constraints 10
preventing the entertainment industry from growing, creating job opportunities and finally from becoming a major exporters of creative goods.
Chapter 3: Nollywood today The prolific entertainment industry in Nigeria
Entertainment as a creative industry has significant potential for growth and value addition for the Nigerian economy. With a population of more than 150 million people and a high demand for African production, Nigeria represents a huge market for the cinema industry. As the industry appeals predominantly to the youth, support to the industry can provide more opportunities for Nigeria’s youngsters and therefore contribute to GDP growth through job creation. The Nigerian Film industry, euphemistically known as Nollywood, is the most prolific movie industry in The average budget of a Hollywood feature film exceeded the sum of $ 106 the world but remains unstructured and loosely million in 2008 (of which $67 million regulated. It is the third largest movie industry in were production costs and $ 39 million the world by value ($250 million) after Hollywood were distribution). A Nigerian feature and Bollywood (India’s film industry) but the first in film therefore costs the equivalent of six terms of films production since Nollywood produces seconds of an American film. no fewer than 40 new movies every week. It is estimated that the Nigerian industry employs 200,000 people directly and provides up to one million job opportunities indirectly. Most of those employed in the industry are graduates or school leavers and the most popular locations to shoot movies are in Lagos, Kano, Enugu and Abuja. Despite tremendous achievements, production standards remain low, marketing and distribution linkages are at best ad hoc and access to finance remains extremely limited. There are few global linkages and a strong need to improve quality at all stages of the value chain from production to post-production and retail distribution. Finally rampant piracy is a scourge for the industry. Nigeria’s music is widely available all over Africa and is attracting international attention due to the quality of its production and exports opportunities. Nigeria's musical output has achieved international acclaim not only in the fields of folk and popular music, but also Western art music written by composers such as Fela Sowande. The Nigeria music industry fuses native rhythms with techniques imported from the Congo, Brazil, Cuba and elsewhere. Highlife was an important foundation for the development of several popular styles that were unique to Nigeria, like apala, fuji, jùjú and Yo-pop. Subsequently, Nigerian musicians created their own styles of United States hip-hop and Jamaican reggae. Nigeria has some of the most advanced recording studio technology in Africa, and provides robust commercial opportunities for music performers thanks to the huge domestic market, big enough to sustain artists who sing in regional languages and experiment with indigenous styles. 11
The Nigerian music market is run by the youth and Nigerian hip hop music is gaining recognition out of Africa. In Africa youth stands both on the demand and the supply side of the market since music is produced, marketed and consumed by young African. Indeed young African consumers enjoy listening African music which is mainly produced and distributed by artists of the same generation whose songs convey a strong expression of African cultural identity. An average of 550 albums from different musicians is released annually in the music sector (56% traditional music, 36% gospel, 18% afro hip hop). Although fewer afro hip hop CDs are released annually, they are in more demand by the market than the other genres and a hit can be easily sold at 3 million exemplars during the first month of its release. Between 2005 and 2008, the number of Afro hip hop CD sold jumped from 10 million to more than 30 million albums. Although online music downloading for Nigerian music is relatively low, more and more Nigerian musicians have their song on Apples-s I Tune which offers them more visibility the worldwide music market. In a time of global recession, Nigerian musicians are earning money in Africa and revenues come mainly from concert and endorsement by Nigerian businesses. Piracy a scourge of the Nigerian film and music industries
The weak copyright protection discourage record label to invest in Nigeria. During the 1980s many international record labels such as Polygram and EMI decided to leave Nigeria. The lack of record labels coupled with the recent development of new data storage technologies (e.g. Compact Discs, Digital Video Discs contrasted to Audio Cassettes) provided an easy opportunity for unlicensed individuals, to copy and mass produce records. An explosion of cultural expression that has accompanied the establishment of democratic government in Nigeria has been exploited by pirates using mass recording machines or importing pirated copies of songs and films from overseas. Law enforcement is almost inexistent in Nigeria and jeopardizes the financial interests from labels and film producers. Powerful vested interests have been created with cartels of pirates reportedly operating with the help of public officials, making it impossible for individual artists to successfully challenge them or bring them to justice. The sheer scale of piracy in Nigeria deters investment and re-investment in the industry and discourages artists from becoming commercial. For instance, it is only in 2010 that the National Copy Right commission established a Collection Management Organization which is formally in charge of royalties’ collection. However, a copyright registration center is still missing and would facilitate IPR law enforcement through prosecution. As many movies producers and artists cannot easily register their works, rampant piracy is pervasive. In the movie industry by some estimates, for every legitimate copy that is sold by the producer another 5-10 are sold by pirates. It is reported that Nigerian movies are widely shown all over the African continent on national broadcasting networks without payment of any royalties to the original film-makers. These challenges make it difficult for producers to recoup their costs. Until the industry can capture a greater proportion of the revenue stream it will be consigned to making low-budget, low-quality productions and will not have the ability to scale-up its operations and provide a larger number of well-paid jobs for Nigeria’s youth. In the music industry, piracy hinders artists from generating revenue since copied CDs are largely available and sold at one fifth of 12
the price of an original CD which costs about $5. In 2006, about N5.9 billion was lost to Piracy in Nigeria which represented about 95% of CDs sold in the country. The other detrimental impacts of piracy include encouraging the continued brain drain of talented artists and other professionals, the loss of cultural heritage, loss of tariffs, taxes and foreign exchange earnings as well as opportunities for foreign investment. Piracy is a scourge for the Nigerian entertainment industry and threats the respect of the international property rights convention. If Nigeria gets a reputation as a nation that is tolerant to piracy many multinationals will steer clear of it. As a signatory to TRIPS (Trade Related Aspects of Intellectual Property Rights) under the WTO, Nigeria has several obligations which are not yet fulfilled. + details but Chris from NPC is out of the country. The Nigerian Copyright Commission (NPC) has made several efforts to enforce some of the related laws and has attempted to improve industrial standards for the IP trade. The NCC is the most important body dealing with IPR and is responsible for handling all matters affecting copyrights and Nigeria’s position in relation to international copyrights conventions, as well as building public awareness of copyrights. Recently NCC has been active in liaising with international organizations dealing with IP rights protection and works on the gradual introduction of authenticating serial number codes on genuine Music and movie CDs. Nigeria lacks of a national comprehensive antipiracy framework which would include all governmental bodies dealing with IPR. First, the Nigerian Customs Service (NCS) regulates cross-border trade and smuggling. In this sense, illegal trade and fake IP goods should be treated on the same basis as fake drugs or fake money and should be confiscated if detected and the dealers prosecuted. Second the Nigerian Investment Promotion Council (NIPC) has a major role to play as piracy deters higher levels of foreign investment. Third, the Standards Organization of Nigeria (SON) standardizes and regulates the quality of all products in Nigeria, and according to section (3) subsection (1) of the 1972 Act No. 56, the statutory functions of SON is, among other things, to “undertake investigations as necessary into the quality of facilities, materials, and products in Nigeria and establish a quality assurance system including certification of facilities, products, and laboratories.” The SON’s concerns in this matter are centered of the fact that pirated IP products are categorically inferior in quality to the genuine ones. Recently SON has cooperated with musicians through their association PMAN, to enforce quality control procedures, in the music industry. An archaic production, distribution and marketing value chain
Nigeria movies are characterized by low quality standards and are produced within three weeks. The vast majority of Nigerian movies are not produced in studios and the duration of shooting generally ranges from 10 to 20 days. Films are made in digital format, which reduce the cost of editing, which takes about 1 to 2 weeks. So the entire process of making a film is usually completed within 4 to 5 weeks. Most are shot on location all over Nigeria with hotels, homes and offices often rented out by their owners and appearing in the movie credits. Using such locations it is very difficult to provide quality sound and lighting. Shooting is often also restricted by the other activities that are going 13
on at the location. Studio space and time is desperately required by the industry and yet has not been provided by the private sector. This situation is a result of the fragmentation in the film industry and lack of music labels as well as the difficulty of capturing revenues from film and music products. In Nigeria distribution channels are inexistent preventing the industry to reap any financial benefits. At the moment there are few formal distribution channels open to Nigerian film-makers and after a film is completed, it goes directly to video stores for rental and sales. There is no established cinema circuit that caters to Nigerian movies and the incentive to do so is low since the target audience of these films is the rural and urban poor, who cannot afford to go to cinema and who watch the movie in informal settings. The few international style cinemas that do exist in a handful of the country’s major towns cater exclusively to international movies. Nigerian movies therefore utilize digital media and go straight to DVD and VCD formats. Without a formal distribution and marketing channel they are unable to reap the financial benefits of a cinema release. Figure 7 : A value chain characterized by the fragmentation of the film industry
African distribution channels for Nigeria’s movies are emerging and contribute to the growth of the industry but property rights are not systematically respected. Distribution channels in Africa include MNET’s Africa Magic and now Africa Magic Plus as well as an increasing number of terrestrial channels such as Hi TV that are showing Nigerian movies. Channel O appears to be the leading music channel as well as forum for releasing high quality short movies of topical interest to a youth audience. MTV Africa and other channels are also increasingly interested in African music. It is reported that these channels purchase Nigerian movies at market rates. Commercial channels are interested in improving the quality of the film and music products that are currently being sourced. Getting better content on their channels will in turn allow them to charge higher rates for their channels when they are marketed to cable companies such as DStv, Nilesat and others. MNET Africa would also like to maintain its branding and image by ensuring 14
that all movies and music products meet the same rigorous quality standards. Eventually they would also like to be able to market and sell African movies to mainstream cable channels (e.g. Black Entertainment Television BET in the US) and other buyers internationally. However burgeoning overseas markets in pirated copies have also developed as the pirates have proved energetic in getting illegal copies to market in many different countries. It is estimated that the lost industry revenue in North America alone could be as high as US$200 million. Lack of technical skills, branding and access to financing
Nollywood industry has almost no access to formal financing mechanisms. The independent self-employed producers generally re-invest the revenues earned from one film for the next one. Due to the unpredictable nature of the profitability of a film, the banks and other financial institutions do not have procedures for assessing the creditworthiness of film projects. This significantly hampers the growth of the industry and discourages producers from innovating and pushing the boundary in terms of quality. Due to the lack of formal training institutes in filmmaking, the industry severely suffers from inadequacy in technically competent people. While the initial technical base of the workforce came from former employees of the Nigerian Television, there has been little scope for training and capacity development of the personnel involved in the industry. This is evident in the relatively deficient quality of Nollywood films when compared to Bollywood or Hollywood films. Improvement in quality is essential if Nollywood has to make a mark in the global film industry and reach a global audience. Nollywood lacks of a branding strategy to compete with other well-established industries at a global scale. The inadequacy in global marketing of the industry and therefore the need for a branding strategy is evident from the fact that relatively few people outside Africa know about the Nollywood industry. Currently, international marketing is more focused on individual films rather than the industry as a whole, without which a nationallevel industry branding will not get established. Looking at the industry today, it is hard to imagine that it started almost by accident only 20 year ago. Indeed, the industry emerged spontaneously by the unexpected release of the box-office movie “Living in Bondage� in 1992 by NEK Video Links owned by Kenneth Nnebue in the eastern city of Onitsha which set the stage for Nollywood as it is known today. Indeed the story goes that Kenneth Nnebue had an excess number of imported video cassettes and came up with the ingenious idea of recording something on them to make them more marketable. The unexpected huge success of this film set then the pace for others to produce other films or home videos The demand for Nigerian movies has never been so strong and therefore a coherent and comprehensive strategy is needed to develop the industry. The African market seems to be insatiable of Nigeria drama and the African Diaspora can assure the further development of the industry. As discussed in next section, Nollywood might feature all the characteristics required to end with what characterized a traditional Hollywood blockbuster: a happy ending. 15
Chapter 4: The irresistible potential of Nollywood The non oil sector in Nigeria is driving growth
Since the return to civilian rule in 1999, the strong performance of the non oil sector has driven growth highlighting the efforts made by the Nigerian government to diversify its economy. Nigeria displays the characteristics of a dual economy characterized by a strong oil sector with few link to the rest of the other sectors. Further the non-oil economy is heavily dependent on the performance of agriculture, services and limited manufacturing activities. Benefiting from the governmental reforms, the non-oil economy grew by 9 percent per year in 2003-07, in contrast to 3.5 percent per year between 1997 and 2000. Interestingly growth was driven largely by the agriculture and services, which dominate the economy, with particularly strong growth in general commerce and telecommunications. Agriculture and telecommunication are driving growth in Nigeria. The agricultural sector grew by 6.2 percent during 2009. High agricultural growth continues to be fueled by a variety of factors including clement weather conditions, government subsidization of seeds and fertilizers and consequent bumper harvests; and expansion of the cultivated land area (stimulated by higher commodity prices, both for food and cash crops). While manufacturing has also grown rapidly, its contribution to the Gross Domestic Product (GDP) in 2008 is modest, at some 7.7 percent while the telecommunications sub-sector maintained its exceptionally strong growth, growing at 20 percent, largely due to robust mobile telephone activity. Due to statistic limitation and to the high level of informality of the Nigerian economy, it is difficult to articulate precise figures related to the contribution of the entertainment industry to GDP. However, it is possible to estimate the size and the market of the most vibrant media scene in Africa. Figure 8 : The future of Nigeria’s is in the non oil economy
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The surge of Nigeria movie production
The emergence of Nollywood is triggered by the demand for cultural good and by the digital revolution happening worldwide in moviemaking. Indeed through Nollywood movies, African can experience a cultural renaissance that even the best foreign movies cannot possibly provide. For instance, responding to the viewers demand for cultural goods which are vehicle of African identity and value, South African media group launched AfricanMagic. This channel shows mostly Nigerian movies to its subscribers in Africa, Europe and the Middle East. In America, the African Diaspora watch Nollywood hits on Afrotainment. Nollywood is the most prolific movie industry and produces exclusively low costs movies. The Nigerian film industry is characterized by an average production of 10 days, an average cost of approximately $15,000 and each film is sold on average between 30,000 and 50,000 copies with mega hits reaching 500,000 copies. These are the local ingredients of a booming US$ 250 million industry. In 2005, Nollywood overtook Hollywood and Bollywood in terms of number of movie produced each year. Indeed in 2005, the United States produced 485 major films; the Mumbai-based film industry produced 1,091 feature-length films while Nollywood became the world largest film producer with more than 2,500 national productions. Figure 9 : Nigeria experiences a surge in film production
Nollywood’s role in Nigerian economy
Nollywood is the biggest employer after agriculture and provides up to one million job opportunities indirectly. The industry is already employing about 200,000 people as producers, directors, actors and indirectly creates a legion of spinoff jobs for young 17
people such as makeup, props and printing. For comparison purposes, the creative industry (movie and television) in Hollywood contributes over US$16 billion to the State of California’s economy, directly employing 164,000 people and indirectly another 184,000. Therefore, there is no doubt that Nollywood, thanks to a large domestic market (150 million Nigerian) and a high demand for its national movie production, can grow while contributing to poverty reduction through job creation in Nigeria. Whether Nollywood could capture a greater proportion of the revenue stream it would become the fourth biggest economic sector contributing to GDP and would rank as the third biggest sector in per cent of non oil exports. According to World Bank, the lost industry revenue in North America alone, due to the absence of formal distribution channel, could be as high as US$200 million. Further the contribution of the film industry amounts to 5 % of GDP and it can be can be assumed that Nollywood’s revenues amounts to more than US$500 million. (yes but we have USD 250 million in the PAD but 500 come from NFVCB). It is interesting to notice that the industry has developed into a profitable cluster without the intervention of the government and that thus with sound governmental policies, Nigeria could certainly strengthen its worldwide market share in entertainment. Figure 10 : The movie industry could contribute significantly to the Nigeria GDP
Figure 11 : Nollywood has a great potential in terms of exports revenue
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The predominance of informal viewing and the absence of product placement and merchandising strategy limit the revenue perspective for the industry. Given the fact that 99 percent of screenings are in informal setting due to the almost inexistence of movie theatre outside major cities, it is not surprising that Box office revenues are marginal in Nigeria. Indeed usually films are broadcasted in informal Video Parlors through the country. Video Parlors are small huts or barracks where local entrepreneurs buy a TV set and VCR or DVD player, and plays the film for a small fee. According to NFVCB, there are 6,8412 Video Parlor registered in the country and estimated 200,000 unofficial parlors. In Hollywood tickets sales account for 20 percent of the studio’s revenue and home entertainment, merchandising and product placement provide 80 percent of the industry revenues. Indeed the profit reality has transformed the way Hollywood operates and theatrical releases now essentially serve as launching platforms for videos, DVDs, network TV, pay TV, games, and a host of other products. Figure 12 : The difficulties for Nollywood to capture movies revenue
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There is a high potential for Nollywood exports since Africa entertainment market is characterized by a high demand for cheap movies offering a strong expression of African cultural identity. Nigeria with more than 150 million citizens is the most populous country in Africa and represents an important market for the entertainment industry. Since, more than half of the population lives below the poverty line and cannot afford watching foreign movies at the cinema (ticket are sold between US$ 7 and US$10), cheap production with strong African cultural identity are highly demanded from a large audience in Nigeria and from the African diasporas. In 2008, Nigeria GDP per capita stands at US$ 1401. According to World Bank estimates, the average Nigerian household dedicates 5 per cent of its revenue for recreational activities. Indeed most of the expenses are related to food and beverage (38%), housing (18%) and transport and communication (16%). Therefore, an average Nigerian family has an annual budget for recreational activities amounting to US$ 70 and will spend about US$ 10 for movie spending. Figure 13 : A typical consumer basket in a developing country.
The authorities and the entertainment industry shall engage in a dialogue to reform Nollywood to unleash its real potential. Indeed as long as the industry cannot capture a greater proportion of the revenue stream it will be consigned to making low-budget, lowquality productions and will not have the ability to scale-up its operations and provide a larger number of well-paid jobs and have a chance to compete on the international entertainment market.
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Chapter 5: Conclusion and recommendations Nollywood is hindered from becoming a global entertainment industry due to market failures requiring reforms from the public and private sector. Although Nigeria prolific movie industry does not benefit from any support from the government and worth more than $ 250 million, the industry is characterized by a low level of production standards, important marketing and distribution linkages and a limited access to finance. Further they are few global linkages, a strong need to improve quality at all stages of the value chain and to address the issue of piracy which makes it difficult for producers to recoup their costs. A recent World Bank discussion paper on “Youth Employment in Africa� identifies a strategy to improve youth employment whose conclusions should be reflected in the reform framework of the Nigerian movie industry. According to the study, the government has to tackle the root causes of and not just the symptoms of the issue and therefore African policy-makers will have to establish a coherent and comprehensive strategy with four subcomponents: health and family planning, literacy and education and skills, investment climate and finally targeted Investments. In the specific case of Nollywood a reform framework should focus on improving the investment climate and includes targeted investment. Overall it is critical to improve the investment climate in the industry since a good investment climate stimulates investment and job creation. Further, direct public support is required through targeted investments justified by the great potential offered by the movie industry in terms of improvement of production standards and growth. Figure 14: Nollywood needs reform while creating youth employment
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Reform Matrix Assuring the development of Nollywood Enforce copyright protection and assure law enforcement
Structure the value chain of the movie industry
5. Rebrand Nollywood :
1st Pillar
Improve business climate
2. Build Public Awareness regarding IPR. 3. Promote law enforcement
7. Mobilize financing
domestic
- Development -
of a packaging and marketing company Organization of a Nigerian movie film festival
8. Turn the Nigerian Film Institute into a movie hub in by providing studio facilities
6. Improving distribution and marketing network
9. Launch a Nollywood fund
2nd Pillar
Assuring youth employment
1. Enhance public sector capacity
Provide the movie industry with direct funding for development
Promote targeted investments
4. Create a property right registration center
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10. Strengthen the Nigerian Film Institute through : • Training • provision of equipment leasing).
Enforce copyright protection and assure law enforcement The first step to combat piracy is to ensure that all films and songs are copyrighted. That in turn requires that all music and movie-makers register their own businesses and products. Only if intellectual property is registered can it be protected. At the moment very few Nigerians register their IPR. Registering IPR for films and music in Nigeria is also a first step to protecting IPR in overseas markets. The most important export markets in the US and EU both require that the IPR is registered in the home country first. This paper recommends a three steps approach to help the Nigeria establish a successful anti-piracy campaign through public sector capacity building, public awareness building and law enforcement. 1. Enhance public sector capacity. It is critical to enhance the capacity of the most important anti-piracy public sector bodies (NCC, NCS, NIPC, SON) operating in Nigeria. For instance it is imperative to provide capacity building support to NCC staff, which has to be appropriately trained since NPC is key actor for the coordination between the various ministries dealing with IPR issues. 2. Build Public Awareness regarding IPR. One of the causes of endemic levels of IP piracy is the ignorance of the general public on IP rights. It is vital that the Ministry of Information provides the public with the right perspective through its powerful media presence. The Ministry of Commerce similarly has the overall regulatory authority and responsibility for these industries. The IP rights offenders violate numerous statutes established by the Ministry for instance the trademark infringement. As it is today, all sections of the IP industries suffer from a lack of supporting infrastructure ranging from poor distribution networks, to general ignorance of government laws and support programs. It is particularly serious in the IP sector (contrasted to other parts of the economy) because the country has only recently begun to understand the latent potential in this sector, and is yet to establish specific provisions to duly recognize and handle various pertinent issues. 3. Law enforcement. The manufacturers and distributors of pirated products are tax evaders. Not only do they not pay tax but their illegitimate sales of counterfeit products prevent the legitimate owners from selling their wares and paying taxes resulting in billions of naira in lost revenue. Thus it is imperative that the Federal Inland Revenue Service joins the fight against piracy. Further the Economic and 24
Financial Crimes Commission (EFCC) has to based its strategy against piracy on its mission statement which clearly define its objective: “To curb the menace of corruption that constitute the cog in the wheel of progress; protect national and foreign investments in the country; imbue the spirit of hard work in the citizenry and discourage ill-gotten wealth; identify illegally acquired wealth and confiscate it”. The EFCC has effectively prosecuted several economic saboteurs, especially the notorious “419” fraudsters, and has thereby helped restore confidence in the minds of prospective foreign investors. EFCC is now encouraged to extend this accomplishment to the IP sector, by similarly targeting the kingpins of the piracy cartels and dismantling their networks. The frontline of the war on piracy depends also on the effectiveness of Nigerian Police Force (NPF). They have the widest network, compared to the other agencies, and could be the most effective at surveillance and implementation of the anti-piracy agenda. The Police need to be familiarized with the specifics of the law’s requirements and include the pirated products in their list of illegal goods. They would also act to demand proper identification and registration of supposed dealers in IP products. An additional concern of the police would be to investigate the relationship between dealers of pirated IP goods, and those of numerous other counterfeit goods, and smuggling rings. 4. Creation of an IPR registration center.
Structure the value chain of the movie industry 5. Rebrand of Nollywood. First a packaging and joint marketing company should be created. This body would capitalize on economies of scale in packaging and marketing. It would have the scale to be able to market Nigeria’s films and music overseas. It would also have the benefit of ensuring standardization and quality of the Nigerian products. Second it should be organized “Red carpet” events would be publicized and marketed creating increased interest and a higher profile for the filmmakers. This in turn would provide more incentive for higher budget and higher quality productions. It would also create an enhanced revenue stream for the best productions. 6. Improving distribution and marketing network. At the moment there are few formal distribution channels open to Nigerian film-makers. There is no established cinema circuit that caters to Nigerian movies. The few international style cinemas that do exist in a handful of the country’s major towns cater exclusively to international movies. Nigerian movies therefore utilize digital media and go straight to DVD and VCD formats. Without a formal distribution and marketing channel they are unable to reap the financial benefits of a cinema release.
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Provide the industry with direct financing for development 7. Mobilize domestic financing. 8. Turn the Nigerian Film Institute into a movie hub in Nigeria. Nigeria needs to have appropriate studio facilities to facilitate the shooting of movie and improve the quality of its production. 9. Create Nollywood fund. The industry association and the government may come together to develop a Nollywood Fund that can provide scholarship to talented filmmakers to study abroad, extend support for deserving filmmakers to go to film festival across the world and to sponsor film festival and awards. 10. Strengthen the Nigerian Film Institute. The Nigerian Film institute should be run by the private sector with public sector support and should fulfill several functions including; (i) Provide a studio facility, (ii) Improving standards through training and capacity building for industry stakeholders, (iii) providing a hub for key industry skills and (iv) providing a location for equipment leasing. First the provision of a studio facility is required since the vast majority of Nigerian movies are not produced in studios. Using such locations it is very difficult to provide quality sound and lighting. Shooting is often also restricted by the other activities that are going on at the location. Studio space and time is desperately required by the industry and yet has not been provided by the private sector. This situation is a result of the fragmentation in the film industry and lack of music labels as well as the difficulty of capturing revenues from film and music products. Creating a professional studio that catered to Nigerian film-makers would go a long way to improving standards. Second, although Nigeria’s film-makers are extremely inventive and capable of improvising to overcome any situation, they will not be able to move up the value chain without increased formal sector training. The best way to provide this is through hands-on experience. It is proposed that the training courses offered should be based on collaboration and partnership with existing schools. Third, the national film institute would provide a natural hub for the industry. It would also be a place where seminars, film festivals and competitions, screenings and shows could take place. It would create awareness and promote the industry both domestically and internationally. The institute would also house the various Nigerian guilds including the Actors Guild, Directors and Creative Writers’ guilds. Finally Nigeria’s filmmakers own almost all their own equipment and there is a need for equipment leasing to upgrade the quality of production through the use of modern equipment. It is proposed that the film-institute would include an equipment leasing facility that would cover its costs of operation and provide training on new equipment and editing software. 26
Bibliography Sacchi, F. (2006), This is Nollywood, Boston : Center for Digital Imaging Art
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