Over the past few decades Nigeria’s media and entertainment industry has developed into one of the largest and liveliest in Africa. The most popular formats, which include radio, television and print media, are an important part of daily life for most of the country’s 168.8m residents. The Nigerian film industry – nicknamed “Nollywood” – is one of the largest in the world by number of films released, and is increasingly considered to be one of the country’s defining cultural institutions, not to mention a potentially large-scale economic contributor. Strong and steady growth in consumption of online media is expected to boost profitability in both the film and music industries in the coming years.

Indeed, rising internet penetration rates throughout Nigeria since the mid-2000s have already resulted in a significant expansion in online advertising, which has become a key component of most national ad campaigns (see analysis). With these developments and the substantial amount of investment that has poured into the nation’s various media outlets in recent years, the sector presents many opportunities.

KEY CHALLENGES: Local media companies and other industry participants currently face a number of challenges. As home to the largest population in Africa, Nigeria’s sheer size and demographic diversity are considered to be a hurdle for firms looking to establish a national footprint, for example. “It is hard to overstate the diversity in this country,” Adekunle Adekoya, a general editor at the Vanguard, a daily national newspaper, told OBG. “More than 400 languages are spoken here, and to reach a national audience you have to broadcast in a minimum of 46 languages.” Additional challenges include the underdeveloped and unreliable electricity grid and national transport networks, both of which increase distribution and transmission costs. Finally, the rapidly increasing popularity of online media over the past five years has resulted in some unanticipated regulatory overlap between government agencies, including the National Broadcasting Commission (NBC), the Nigerian Press Council (NPC) and the Nigerian Communications Commission (NCC), among others.

EXPANSION AHEAD: Despite these issues, most local media firms are looking forward to years of expansion. The nation’s size and scale, which are currently considered to be a hurdle to ongoing expansion, are also representative of the market’s considerable long-term growth potential. Indeed, according to the International Telecommunication Union (ITU), a UN agency, internet penetration in Nigeria stood at less than 30% as of mid-2012. As the connected population grows in the coming years, demand for online media is expected to rise considerably. In the meantime, Nigeria remains a major market for printed newspapers, CDs, DVDs, and other physical media. “The internet is growing rapidly, but most media consumption is still physical here,” Audu Maikori, the CEO of Chocolate City, a Lagos-based music and entertainment company, told OBG.

OVERSIGHT & REGULATION: The NBC was established in 1992, as a result of the federal government’s effort to liberalise radio and television. Since then it has overseen the development of the broadcasting industry. An update to the NBC code, which serves as the sector’s regulatory backdrop, was completed in mid-2012. The revised document, which was developed in conjunction with public and private sector stakeholders, addressed a number of issues that had yet to be codified in law, including the forthcoming switch from analogue to digital broadcasting in television and the need for the industry to invest in and broadcast more local content. In general, the updated code is widely considered to be an improvement on the previous governing legislation, of which four versions have been passed since the early 1990s.

At the same time, a number of regulatory challenges remain. Press freedom, which improved considerably as a result of the institution of civilian rule in Nigeria in 1999, continues to be a topic of discussion and discontent among local publishers and broadcasters, many of which have criticised the government for overstepping its bounds on a number of occasions. Out of 179 countries included in the 2013 Press Freedom Index, an annual report published by Reporters Without Borders, Nigeria ranked 115th, up from 126th in 2012.

In addition to these issues, the NBC currently faces the prospect of eventually merging its operations with the NCC, as a result of a federal initiative to bring the two organisations under the same roof. The merger, which was approved by the Federal Executive Council in late 2012, is being considered due to the overlap between traditional media and the communications sector as a result of the expansion of internet use.

The NPC, which was launched in 1992, oversees the print segment in line with the Nigerian Press Council Law that established the body. It has a mandate to maintain press freedom and ethical conduct. On a day-to-day basis it serves as a buffer and mediator between the government and the Nigerian Press Organisation, an umbrella entity that is made up of major industry stakeholders. Finally, the advertising industry is overseen by the Advertising Practitioners Council of Nigeria (APCON), which was set up in 1988 with a mandate to develop the sector in line with international best practice and classify and regulate local firms.

IN PRINT: Nigeria is home to more than 100 print publications in total, including daily and weekly newspapers, weekly and monthly news and entertainment magazines and tabloids. Historically the country’s print media has had a pan-African reach – the Daily Times of Nigeria, established in 1925, went on to see daily regional circulation in excess of 275,000 (and 400,000 for the weekend edition) in the mid-1970s, making it the best-selling Nigerian newspaper to date. While no individual publication has topped these circulation figures since then, the sector remains the cornerstone of Nigerian media. “Private newspapers are widely seen as the most credible source of news in the country,”

Vanguard’s Adekoya told OBG. “This is a result of the history of the sector – many Nigerian newspapers were at the forefront of the fight against colonialism during the run up to independence in the 1950s and 1960s. For the same reason, many people still do not trust government-operated newspapers.” Nonetheless, there are still issues with reliability even among private newspapers, and corruption and payment for positive coverage are considered to be widespread.

CIRCULATION: The most recent sales data dates from 2010, when the Advertising Association of Nigeria carried out the nation’s first (and only, as of mid-2013) independent newspaper circulation survey. According to the report, the 15 top newspapers by distribution had a total circulation of less than 300,000 at the time, though this figure has since been disputed by a number of local publishers. Based on the survey results, the largest newspapers in Nigeria in mid-2010 were The Punch, The Nation, The Sun, Vanguard, The Guardian, This Day, Daily Trust and The Tribune. Other major local publications include The Champion, Business Day, New Nigerian,

The print sector currently faces a number of challenges. The lack of reliable electricity supply means that most publishers rely on expensive diesel generators to power their presses. Distribution, which is hampered by the country’s decrepit national road network, is another key challenge. “To get around the transport issue, we print in numerous locations, including Lagos, Abuja and Asaba, in the Delta region,” said Adekoya. “We also fly newspapers to Port Harcourt and the far north, which is effectively unreachable on a daily basis.”

The sector also faces security threats, particularly in a handful of north-eastern states, where individual journalists and publishing facilities have been targeted by members of Boko Haram in recent years. Finally, perhaps the most pressing long-term challenge facing the industry is the rise of digital media, which, as in most other markets, threatens to undermine traditional newspapers and other print media organisations. These issues are expected to have a major impact on the development of the sector moving forward.

TUNED IN: Radio, which is low-cost and available in most parts of the country, is one of the most popular types of media in Nigeria, both in terms of overall listeners and advertisers. According to the NBC, Nigeria is home to more than 135 radio stations in total, including 80-plus publicly owned stations, at least 25 private stations, around 20 university-based stations and a handful of foreign broadcasters. The first radio broadcast in Nigeria took place in 1933, when colonial leadership relayed the BBC’s overseas service to Africa. In 1950 the Nigerian Broadcasting Service was established, and in the late 1970s became the Federal Radio Corporation of Nigeria (FRCN), which operates more than 40 national stations providing a wide range of programming in a variety of languages and dialects, depending on the region in which they are broadcast. Additionally, all 36 of Nigeria’s state governments operate a radio station.

The radio sector was liberalised in 1992, at which point the newly formed NBC began granting licences for private radio stations. Since then a handful of private broadcasters have gained market share, including The Beat 99.9 FM, Silverbird Communication’s Rhythm FM, Raypower, Star FM, Freedom Radio, Cool FM and Brilla FM, among others. Additionally, in recent years many private radio stations have begun broadcasting digitally on the internet. “We have made a real effort to grow our brand online in recent years, and particularly on social networks like Facebook and Twitter,” Deji Awokoya, the general manager of The Beat 99.9 FM, told OBG.

In early 2013 the federal government announced that it planned to set up around 800 new community radio stations, primarily in an effort to reach rural areas. The community radio initiative, which has been in development since late 2010, is being supported by a number of international development agencies, and is expected to create around 12,000 new jobs.

CHANNEL SURFING: Since the liberalisation of the broadcast sector in 1992, the television industry has become a key investment destination for local and foreign players alike. Nigeria is among the largest television markets in Africa – in early 2012 an estimated 79% of Nigerians had a working television at home, according to a joint poll carried out by Gallup and the US’s Broadcasting Board of Governors (BBG). The majority of this national audience primarily views terrestrial free-to-air broadcasts. The Nigerian Television Authority (NTA), the government-owned legacy operator, is one of the largest broadcasters not just in Nigeria, but in sub-Saharan Africa as a whole, claiming an estimated audience in excess of 50m. The NTA broadcasts from all 36 state capitals and the federal capital territory.

Private sector players dominate the satellite and cable segments. According to the Gallup-BBG poll, an estimated 13% of the country had a satellite dish and just over 10% had a fixed cable link. The South African firm Multichoice, which rolled out its Digital Satellite Television (DS tv) pay service to the Nigerian market in the mid-1990s, soon after liberalisation took hold, is among the most popular stations operating in the country today. StarTimes, a Chinese broadcaster that has been active in Nigeria since the mid-2000s, partnered with the NTA in 2010 to launch NTA Star TV, a digital terrestrial television station that has gained market share among Nigeria’s growing middle class in recent years. Other major players include African Independent Television, which broadcasts throughout the region; the Silverbird Group, a local conglomerate that has also become a presence in retail in recent years; and Galaxy Television, among others (see analysis).

THE SILVER SCREEN: The history of film in Nigeria can be traced back more than a century. The first film showings took place in August 1903, when a Spanish production firm screened a handful of short movies in Lagos. Three decades later the Colonial Film Unit, which was launched by the government in 1939, produced didactic films on a variety of subjects, including health care, farming techniques and nutrition. Finally, in 1979 the Nigerian Film Corporation (NFC) was established by law, and it continues to serve as the government’s agency for film development and promotion.

Private sector development began in earnest in the 1990s, and over the past two decades Nigerian filmmakers and producers have built a private sector-led industry that is increasingly considered to be a driving force in global cinema. In terms of films produced on an annual basis, Nollywood has been the second-largest film industry in the world since 2009, when it surpassed the American film industry in Hollywood. According to numbers put forward by the online publication African Movies News, in addition to estimates by the BBC and The New York Times, some 2600 films are produced in Nigeria on an annual basis. Most Nollywood films are made on the cheap – generally for between $10,000 and $15,000 – and released quickly, with an average production taking eight to 12 days from start to finish. The great majority of the movies are released directly to DVD and distributed throughout Africa, where many Nigerian filmmakers have a large following.

Since Nollywood kicked off as a grassroots movement in the early 1990s it has remained largely unregulated, under-developed, in terms of licensing and permits, and until recently was unexamined by statistics organisations. Consequently, the sector’s full economic impact has yet to be measured. According to estimates from the BGL Group, a Nigerian investment company, as of mid-2012 the industry employed around 1m people, making it the country’s second-largest employer after agriculture. BGL estimates that Nollywood grosses $200m-300m annually. While the sector lacks a regulator, over the years several public entities and industry organisations have been launched, including the NFC, the Nigerian Copyright Commission, the National Film and Video Censors Board (NFVCB), the Actor’s Guild of Nigeria, the Director’s Guild of Nigeria, the Association of Nollywood Core Producers, the Filmmakers Cooperative and the Screenwriters Guild of Nigeria.

CHANGING LANDSCAPE: Since the May 2013 appointment of a new managing director at the NFC, the body has moved forward with plans to become a key growth driver in the industry, with a particular focus on boosting funding and training, and combating piracy. At an industry event in Lagos in July 2013, Danjuma Dadu, the organisation’s new administrator, announced that he planned “to seek ways of moving ahead with the industry; to make it compliant with international best practices.” One of the NFC’s key short-term goals involves pushing a new Motion Picture Practitioners Council (MOPICON) bill through the National Assembly.

The bill, which has been circulating in draft form in Nollywood since 2006, would establish an overarching regulatory framework for filmmakers in Nigeria in line with best practices, with the objective of streamlining production procedures. According to the NFC, which introduced MOPICON in the mid-2000s, passage of the bill would likely result in a considerable uptick in foreign investment in Nollywood. Indeed, in recent years a number of international financial organisations have made initial moves to invest in the industry, only to back out due to the lack of a formal legal framework and other protections. As of mid-2013 the bill was under discussion in the government.

OTHER INITIATIVES: In addition to its work on MOPICON, the NFC also recently announced that it planned to introduce a handful of new educational diploma and certificate programmes aimed at ensuring that filmmakers are trained. The new programmes are likely to be rolled out in conjunction with the National Film Institute (NFI), a film school owned by the NFC that was established in Jos in 1995. Other projects that are either under way or in discussion at the NFC include the establishment of an NFI campus in Lagos; a joint initiative with the National Copyright Commission to develop a long-term anti-piracy plan; a move to organise monthly film screenings nationwide; the creation of Plateau Film City; and the establishment of a multimedia film centre in Abuja. Additionally, in August 2013 the NFC announced its plans to produce a series of animated films for children, with the goal of promoting Nigerian cultural traditions. These movies are expected to be released in Yoruba, Hausa and Igbo.

DEVELOPMENT HURDLES: A lack of financing is among the largest challenges currently facing Nollywood. Expensive local bank loans from a small group of willing lenders – including the Bank of Industry and the Nigerian Export-Import Bank, among others – have historically been responsible for a majority of funding. As a result of the industry’s growing reputation around the world, however, in recent years the sector has attracted new attention from both public and private sector players. In March 2013 the federal government announced that it would establish an N3bn ($18.9m) fund to support the nation’s film industry, with a focus on upgrading production values across the board.

Roberts Orya, managing director and CEO of NEXIM Bank, told OBG, “Nigeria has been learning from India how to provide stronger financial support to the film industry. Years ago when Bollywood was at a more rudimentary stage, the Indian government spearheaded financial support for the film industry by strengthening intellectual property rights, while the Reserve Bank of India also issued directives to the banks on how to lend to this virgin segment based on key factors like insurance and cash flow.”

Since 2010 the government has also overseen a project to provide loans to local filmmakers and producers, though many of these players have complained that the loans are hard to access. A number of state governments also work to support the industry. In 2012 Lagos State government launched the Nollywood Upgrade Project, which aims to provide support in the form of film grants and training to local filmmakers. More broadly, in May 2012 the Federal Capital Territory Administration began work on the Abuja Film Village, a 5000-ha development that is expected to serve as a centre for Nollywood. In 2010 the World Bank announced that Nollywood would be a major beneficiary of its Growth and Employment in States (GEMS) project, which is aimed at encouraging job creation in high-potential non-oil sectors, including hospitality, information and communications technology, wholesale and retail trade, tourism, construction and real estate, and entertainment. The initiative, which is being financed by a $160m loan from the World Bank and a £90m ($145.5m) grant from the UK’s Department for International Development, is slated to create at least 10,000 jobs by 2018. A substantial percentage of these are expected to be in small and medium-sized enterprises.

A considerable amount of this funding has gone to Nollywood-related projects. In conjunction with a number of government partners – chiefly the Federal Ministry of Trade and Investment – funding has gone towards projects aimed at reducing piracy, improving distribution networks and establishing institutions to support the industry. Local entities that have benefitted from include the Nigerian Copyright Commission, the Nigerian Export Promotion Council and the NFVCB, among others. “Greater financing is the only factor standing in the way of the Nigerian film industry making it to the next level,” Ben Murray Bruce, chairman of Silverbird, told OBG. “Higher production values will not only increase the international appeal of Nigerian films, but will create longer-term job opportunities.”

DISTRIBUTION: Facilitating more efficient distribution of Nollywood films is another pressing challenge. Cinemas are few and far between, although local firm Silverbird now runs the largest regional chain, with more than 50 screens in Nigeria and neighbouring Ghana. Currently, most films are distributed on DVDs, which are quickly copied and pirated. According to a 2011 report by the World Bank, for every legitimate Nollywood DVD sold by a producer, pirates sell an estimated 5-10 illegal copies. With this in mind, producers and filmmakers are working to strengthen their ties with television stations, many of which broadcast Nollywood films throughout Africa and other parts of the world, and pay studios for the right to do so. Additionally, digital distribution has picked up in recent years, and is increasingly seen as a potential growth driver in the industry. Large Nigerian diaspora communities in the UK, the US and other Western countries are largely responsible for driving demand for Nollywood films online.

DIGITAL MEDIA: Over the past five years new technology has begun to transform the media and entertainment industries. Internet users grew from just 5m in 2006 to 48.37m at the end of June 2012, according to data from the ITU, which makes Nigeria the largest internet market in Africa. NCC figures put the number of mobile internet subscribers at 25m in the same month, meaning slightly more than half of those who accessed the internet did so by mobile phone.

As in many other countries around the world, the rise of widespread internet use in Nigeria has threatened to undercut traditional media. Most of the country’s newspapers, for example, have seen declining subscription and readership rates in the past decade.

In an effort to combat this trend, most major publications have launched full-service websites, which, according to anecdotal reporting from news organisations, have seen steadily increasing traffic since 2011, in particular. “It is not inconceivable that in the future hard copy newspapers will disappear entirely here,” said Adekoya of the Vanguard.

ONLINE REACH: Both Nollywood and Nigeria’s nascent music industry have benefitted from rising internet penetration rates in recent years. Iroko Partners, a Lagos-based firm that was established in September 2010, has acquired the rights to large collections of Nollywood films and albums and made them available online for paying subscribers. The firm, which operates across a number of online platforms, has seen rapid uptake over the past three years, and, as of mid-2013, claimed to be “the world’s largest distributor of African entertainment,” with an audience of 6m users from 178 countries. While local subscribers are expected to play an increasingly important role in the future, currently the majority of the firm’s customers are members of Nigeria’s large diaspora community. The fact that the company pays filmmakers, musicians and other content producers to use their work is relatively novel in Nigeria, where CD and DVD piracy are common.

This is particularly true for the music industry, which is considerably less-developed than Nollywood, for example. Indeed, while many Nigerian artists are popular throughout Africa and, in some cases, around the world, the country lacks a formal domestic music industry, per se. Most artists earn an income not by selling recorded copies – digital or otherwise – of their work, but by playing live shows. Consequently, residuals, royalties and other revenues from digital distribution represent a new form of income for many recording artists.

“The Nigerian music industry has grown exponentially in the last few years, but record companies have so far failed to monetise this popularity and potential,” Tola Odunsi, the CEO of Storm 360, a local entertainment company, told OBG. “With new developments and opportunities in digital music, however, this is all about to change.” iROKING, which was launched by Iroko Partners in 2012, is one of the leading local digital music platforms. As of mid-2013 the service boasted a library of more than 35,000 songs by African artists, all of which are available for streaming or downloading via numerous channels and programmes around the world. The firm has deals to distribute music from its catalogue through Western digital marketplaces, including Apple’s iTunes, Spotify and Amazon, among others.

INTERNATIONAL INTEREST: Nigeria’s growing tech-savvy population has attracted the interest of a number of major international media and entertainment players in recent years. In March 2013 the US-based Universal Music Group partnered with Samsung to launch The Kleek, a digital music service that offers a mix of tracks from Universal’s international catalogue and African artists. Similarly, in late 2013 Deezer, a French music streaming company, launched in Nigeria, in line with the firm’s roll-out across Africa in recent years. In December 2012 Apple launched iTunes in 56 new markets around the world, including Nigeria and 13 other countries in Africa. Finally, in June 2013 Spinlet, a digital music distribution platform, launched in Nigeria. Spinlet’s operation, which was established in conjunction with the mobile telecoms operator Etisalat, allows users to purchase tracks using phone credit. Despite this influx of new players and the rapidly growing number of Nigerian internet users, the country is widely considered to be a challenging operating environment for digital media distributors. As of mid-2012 internet penetration reached less than a third of the population, according to data from the UN, and very few internet users are willing to pay for the data speeds that are necessary to support on-demand streaming services such as those offered by Spotify, for example.

Additionally, according to Informa Telecoms and Media, a UK-based research firm, at the end of 2012 only around 10% of mobile telecoms subscribers used smartphones. Designing digital music services that are accessible via low-bandwidth basic mobile phones is a challenge. This is not a high-revenue business plan – like Iroko Partners’ movie distribution platform, a considerable amount of iRoking’s revenue, for instance, comes from Western markets, where the firm’s music catalogue is available on iTunes and other major pay services. Similarly, users of The Kleek stream playlists have been designed with mobile phone access in mind.

ADVERTISING: Spending on advertising in Nigeria has grown exponentially over the past decade. In 2003 the country saw less than N18bn ($113.4m) in total above-the-line ad spend – which includes television, radio, print media and outdoor – according to data from local industry research firm MediaReach OMD. By 2011 – the most recent confirmed data available at time of publication – this figure had jumped to N102.8bn ($647.6m). Lagos attracted 54% of 2011 ad spending, and television ads accounted for around 45% of the total. As in many other African markets, telecoms firms were among the most active advertisers, with the top four mobile service providers – MTN, Globacom, Etisalat and Airtel – accounting for more than 19% of total spend for the year, according to MediaReach. Other major advertisers include financial services firms and banks, food and beverages companies and alcoholic drinks producers.

AD MEN: According to the Association of Advertising Agencies of Nigeria (AAAN), an industry body, as of May 2013 the sector was composed of around 100 professional players and more than 1000 informal, unregistered firms. In total, advertising contributes more than N300bn ($1.89bn) annually, according to AAAN. As the most populous country in Africa, most large international agencies are represented in Nigeria, either on their own or in partnership with a local firm.

Major players include STB-McCann; SO&U Saatchi & Saatchi; Ogilvy; Lowe Lintas Lagos; Insight Communications, which partners with the US-based Grey Group; Centrespread FCB; Prima Garnet; DDB Lagos; and Rosabel Leo Burnett, among others. In recent years many advertisers have looked to digital placement, both on webpages and via mobile phone networks.

In late 2012 Nigeria was home to the largest population of social media users in Africa, according to Socialbakers, a Czech digital research firm. With this in mind, many advertisers are demanding campaigns that focus on digital advertising strategies (see analysis).

REFORMS: In January 2013 APCON, the primary advertising regulatory body, introduced a raft of reforms, with the aim of bringing the industry in line with international best practice and boosting local participation and content. The new legislation requires all advertising firms to be licensed by APCON, which is expected to result in a decline in informal firms and unlicensed campaigns. Perhaps more importantly, the reforms aim to boost indigenous activity. While the new legislation makes it clear that APCON does not wish to stifle foreign investment or interfere with competition, under the reform bill the industry is expected to “consider Nigerian content as an important element” of any given project or campaign.

More specifically, the bill stipulates that a firm must submit a Nigerian content plan to APCON before it is eligible to receive an operating licence, for example, and agencies are required to use local talent and labour whenever possible, both in terms of hiring full-time employees and when it comes to producing individual advertisements. The reform bill is widely considered to be a response to numerous complaints of foreign content and firms dominating the industry in recent years.

Since it was introduced, the bill has attracted criticism from local and foreign players alike, many of which have publicly questioned whether or not APCON would in fact be able to enforce the new requirements. Another key challenge currently facing advertising agencies operating in Nigeria is the widespread lack of up-to-date, reliable circulation and viewership data about most media segments, which complicates the industry’s ability to price advertising campaigns effectively.

OUTLOOK: Nigeria’s media, entertainment and advertising industries face a number of interrelated challenges. The underdeveloped transport infrastructure is considered to be a key hurdle for print publications, as poorly maintained roads have resulted in high transport costs. Nigeria’s unreliable electricity grid also represents a challenge for local media firms, a majority of which have invested in diesel generators to ensure a steady supply of power, raising operating costs. According to Akinlola Irewunmi Olopade, CEO of out-of-home advertiser Afromedia, “Digital billboards are the way forward, however, independent power generation will represent a large upfront cost to the advertising firm.” Finally, the steady and rapid expansion of internet usage represents a challenge, but is also considered to be a major opportunity for ongoing expansion.

Indeed, despite numerous challenging issues, media firms, advertising agencies, and film and music production companies are broadly optimistic about the future. Nigeria is uniquely situated to become a key international player in many of these areas. Nollywood, which is already a major economic contributor, has a devoted audience throughout Africa, parts of Asia and the Caribbean. With new investment on the way, the Nigerian film industry is on track to grow exponentially, which bodes well for the related and semi-related television, radio and music industries, as well. Key to taking advantage of these strengths will be local businesses’ ability to adapt quickly to the rapidly changing market.