Nollyfund

BACKGROUND The Nigerian Creative Industry has been recognized as one of the country’s most dynamic economic sectors contributing 1.42% to the nation’s rebased Gross Domestic Product (GDP) in 2013 with an estimated annual revenue of $590m (Source: Africa Renewal, a publication of the United Nations).

Access to structured finance and distribution channels are major challenges confronting the industry.  To this end, the Bank has been financing distribution channels such as cinemas and DVD/CD distribution chains. The industries in this category are asset based which enabled them to provide the needed security.

However, the content industry which has copyright as its main asset has been unable to generate requisite tangible asset based collateral to support loan applications.

RATIONALE BOI intends to intervene in this particular sector for the following reasons:

  1. It is a very important emerging sector in the economy.
  2. Contributed 1.42% ($7.3 billion or N1.4 trillion) to Nigeria’s Re-based GDP in 2013.
  3. Contributed to enhancing the image of Nigeria as Nollywood movies are being watched globally.
  4. Nollywood now ranked 3rd in the world after Hollywood (America) and Bollywood (India) in terms of number of contents produced.

Other rationale are as follows:

  1. Provide the needed financing required to grow the film industry and make bigger impact in the sector.
  2. Address the collateral requirements needed to access loan

g.    The product will enable the Bank deepen credit to the creative sector and job creation.

  1. The sector enjoys the support of the Federal Government.
  2. The anticipated risks are dimensioned and mitigated by the transaction structure.
TARGET MARKET/

CRITERIA

The Fund will be accessed by Limited Liability Companies and Enterprises engaged in film production which includes beneficiaries of the Federal Government’s Project ACT Nollywood Grant for the movie industry. For the purpose of the pilot scheme, fifteen (15) established and emerging producers have been identified as prospects as detailed in Appendix I. However, this is not exclusive to the above groups.
PROJECTED IMPACT The fund shall be used for film production value chain (i.e. From pre-production to post-production). This is expected to create a minimum of 2,000 direct and 5,000 indirect jobs for Nigerians.
PROGRAM LIMIT N1.0 billion
SINGLE OBLIGOR LIMIT N50.0 Million.
 

 

PRICING

 

Interest rate: 10% per annum payable at the end of every month.

Fees:

·        1% Processing fee

·        1% Commitment Fee

·        Quarterly Monitoring Fee of 0.125% of outstanding Principal

 

TENOR ·        Maximum of one (1) year commencing at the end of the moratorium period.
MORATORIUM ·        Six (6) months (with option for additional (3) three months) from date of loan disbursement.
COLLATERAL/ SUPPORT Based on broad engagements and study of underlying collateral/security arrangements as adopted in Canada, America and some select European financial institutions that finance films, the under-listed collateral arrangements are suggested:

·        Copyright Assignment to BOI.

·        Personal Guarantees of Producer and any other individual of repute.

·        The distributor would issue Minimum Guarantee (MG) to cover the full value of project plus interest element for the period.

·        The distributor would issue an undertaking to remit all cinema proceeds of the film based on agreed arrangement to designated bank.

·        The Distributor shall make a security deposit of 5% of the loan amount.

·        Domiciliation of film proceeds with the selected/accredited MSME friendly banks. BOI would be the sole signatory to the account.

·        Referral Letter from a Recognised Organized Private Sector (OPS), Guild or Association.

FUNDING

STRUCTURE

·        BOI (Term Loan)           –   80% (Maximum) of the production cost

·        Producer’s  (Equity Contribution)    –   20% (Minimum) of the production cost

DISBURSEMENT In phases in accordance with agreed milestones.
REPAYMENT SOURCE From the proceeds of movie via ticket sales at the box office and other channels of distribution.

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