Asset Managers Target Nollywood for Lucrative Returns

Earlier this month, vibrantly dressed film stars mingled with grey-suited asset managers on the top floor of a car showroom in Lagos, all focused on discussions about monetizing movies.

Nollywood, Nigeria’s dynamic filmmaking industry, is thriving. While exact statistics are elusive, the country ranks second in annual movie production globally, right after India, and it’s estimated that over a million people contribute directly or indirectly to this sector. Despite widespread poverty and escalating inflation, cinema attendance has surged, with ticket sales jumping 60% last year, reaching 11.5 billion naira ($8 million), according to the Cinema Exhibitors Association of Nigeria.

“We view Nollywood as a lucrative investment opportunity,” stated Folajimi Alli-Balogun, an assistant vice president and head of the film desk at MBO Capital, during the Lagos event. He emphasized that along with the industry’s remarkable growth domestically, “there exists a vast market for Nigerian films outside of Nigeria.”

MBO Capital is among the asset management firms increasing their stakes in Nollywood after streaming giants Netflix and Amazon Prime ceased commissioning original films in Nigeria. Previously, Nollywood films had modest budgets, sometimes costing as little as $35,000, but the arrival of these platforms transformed the landscape by providing filmmakers with significant financial support and distribution avenues. While these companies will continue to buy Nigerian films, filmmakers will now receive payment after production, creating a funding gap that asset managers are keen to bridge. The higher the streaming services pay, the greater the potential returns if production costs remain low.

At the center of this are streaming contracts, Alli-Balogun explained. Financing film projects can be precarious, even with Nollywood’s lower budgets, but a commitment from a streamer to purchase the film mitigates that risk. Additionally, once a film is showcased on a streaming platform, it has the potential to generate ongoing royalties for the filmmaker (and their backers) for years. A typical investment of $500,000 in a Nollywood film, made by MBO Capital through a mix of equity and debt, can result in returns “between 30 and 40%” on the equity side, according to Alli-Balogun. “Such opportunities for returns are rare.”

Nigeria, Africa’s most populous nation, boasts a large and engaged viewership that led Netflix to launch a local streaming option in 2020, followed by Amazon Prime the next year. This viewer base continues to expand. A report from consulting firm PwC predicts that by 2024, the market value of Nigeria’s entertainment and media sector, currently growing at an average rate of 8.6% annually, will reach $13.6 billion by 2028—a $4 billion increase from 2023, with movie ticket sales projected to account for approximately half of that growth.

Historically, Nollywood films trailed behind US productions in popularity, but that trend has shifted in recent years, as storylines have become more relatable. A substantial diaspora audience has further increased viewership. Nigerians living abroad, especially in the UK and US, regard Nollywood films as a means to reconnect with their heritage and ensure their children stay connected to Nigerian culture.

MBO Capital released 10 films financed on Amazon Prime last year and anticipates releasing another nine this year. Their lineup includes the dramatic titles “Gangs of Lagos,” “Kill Boro,” and the sequel to the romantic comedy “The Wedding Party,” which set box office records upon its release.

While comedies tend to perform well, Alli-Balogun remarked, “ultimately, people are drawn to a compelling story.”

Yet, despite the growth, “securing funding can be tough,” noted Lillian Olubi, who transitioned from finance to establish her production company, Gold Lilies Global Service, to leverage her expertise in the industry.

This challenge is one reason why Lagos-based asset manager Chapel Hill Denham initiated a $1.2 million program last year aimed at providing financial resources and business development—while attracting third-party financing—for the entertainment and media sector. In an interview, CEO Bolaji Balogun indicated that “about 35 or 40%” of the funds raised will go toward future film development.

The majority of Nollywood films are financed independently, with producers relying on personal funds or help from family and friends. Introducing banks and asset management firms to provide private capital could shift this dynamic, offering the industry much-needed stability. “It is crucial for many of us to tell our stories, so domestic capital must also get involved,” he added.

With film and TV funding still somewhat challenging to secure, there’s hope that private financing could alleviate pressure on filmmakers while ensuring that asset managers see safe—and substantial—returns.

This shift could also transform Nollywood in various ways, according to filmmaker Steve Gukas, who produced the blockbuster “93 Days,” about the Ebola outbreak.

Gukas, who recently obtained bridge funding from MBO Capital for a series he’s producing for Amazon Prime, remarked that collaborating with private capital offers benefits beyond just receiving funds. “As a creative, you sometimes make artistic choices that aren’t economically viable, so having that guidance is also valuable for the industry.”

Others are cautious and await further developments. “I believe more experimentation is necessary before the ideal funding model for Nollywood can materialize,” suggested filmmaker Obi Emelonye, who has secured funding from a bank for a current project. “However, the financial sector tends to be risk-averse, which is a fundamental challenge in the film industry.”

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