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A business case for Private Equity Investment in Nigeria’s Entertainment Sector



The Entertainment and Media (E&M) industry has become a gold mine in the most advanced economies and other developing markets are just beginning to harness it. For the purposes of this piece, E&M hereinafter refers to commercial activities related to the production, marketing, distribution, broadcast, licensing or other exploitation of media and entertainment assets; assets such as music, films/TV shows, video games and other multimedia content. The increasing convergence of media and entertainment with telecommunications and technology is a key growth driver of the sector globally.

Given the maturity of entertainment markets in the West, investors’ eyes are beginning to turn towards the huge (and for all intents and purposes untapped) Asian and African markets respectively.

The potentials of the Asian entertainment markets have been clearly recognised with investment firms having already positioned themselves to capitalize on the anticipated growth. For example in India, KKR and Chernin Group formed a joint fund, Emerald Media, to invest specifically in digital E&M businesses. Similar strategies can also be seen in Singapore and South Korea.

And it is not just the increased investment that is eye-catching; returns have also been positive. According to investment analysts, Venture Intelligence, E&M investment in Asian markets in 2015 hit a record high of just under $90 million, with a corresponding record number of exits valued at $294 million at an average return ranging between 20 and 25 percent.

On the other hand the Nigerian E&M markets (and those across Africa generally – South Africa excluded) are still only in their earliest stages of development. Despite total private equity investment in Africa seeing a steady increase over the last few years – with $3.8 billion invested across the continent over the course of 2016 – very little of that investment (less than 1 percent) has gone into E&M anywhere across the continent let alone Nigeria.

Market Value

The overall value of the Nigerian E&M sector, especially when held up against other comparable developing E&M markets, can be perceived as significantly lacking in value.

According to Price Waterhouse Cooper’s “Entertainment and Media Outlook: 2017-2021” report, the combined total estimated value of the music and film segments of Nigeria’s E&M sector is circa $3.2 billion. When compared to South Korea ($11.6 billion) or South Africa ($9 billion), it is clear that the Nigerian E&M market still has a significant value gap to bridge. However, in light of strong market indicators, this gap is expected to be significantly reduced in the short to medium term.

Domestically, despite some macroeconomic volatility, there are positive demographic factors and socioeconomic trends that bode well. These factors and trends have been well documented and can be summarised as follows: a youthful, aspirational, and increasingly urbanised population that is growing at an exponential rate. Moreover, increasing mobile technology and internet penetration further strengthens the domestic opportunities. Combine these indicators with the increasing consumption power and appetite of a growing middle class, and the possibilities become clearer.

Foreign market opportunities also look bright. Nigerian cultural products and services are increasingly gaining export value particularly due to increasing numbers of diaspora Nigerians spending more of their incomes on homegrown entertainment. Furthermore, strengthened African influence on global popular culture means demand for Nigerian entertainment products will only increase abroad.

For example, popular Nigeria based performers are now selling out major venues around the world and Nigeria based digital content producers and distributors are finding that an increasing portion (if not the majority) of their audience/users/subscribers are based in Europe, Asia and the United States.

Investment Opportunities

It is the author’s considered view that the time has arrived for private equity (and venture capital) investment to start flowing into certain strategic segments of the Nigerian E&M sector.

Recent currency devaluations, despite being perceived as having an adverse effect on institutional investor appetite for investments in Nigeria, have actually presented an opportunity for investors to gain stakes in well positioned media and entertainment businesses at much better rates thereby reducing risk and positioning themselves for potentially much higher returns. E&M investments provide the best opportunities for large returns with minimal risk to investors who have (access to) specialised expertise in, and knowledge of, the market.


And the opportunities are tremendous. Iroko Partners Ltd, whose core business Iroko TV (a subscription video on demand service (SVOD)), has successfully raised $40 million till date with backers including Kinnevik, RISE and Tiger Global. Furthermore, some seed investors exited with returns of over 3000% on their investments after an average investment hold period of around 4-5 years. The business has since expanded to integrate an audiovisual production arm into its operations in addition to launching television channels both in Nigeria and the UK. It recently also announced that for the first time, the majority of its revenues came from outside Nigeria.

When one considers that the majority of private equity investments in Africa in 2016 alone were investments of less than $50 million, small investments (ranging from $500k – $2 million) in viable businesses such as this, and others in the Nigerian E&M sector, seem a very worthwhile prospect when potential returns are weighed against risks.

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In conclusion, there is an increasing opportunity for private equity firms to generate significant returns in the Nigerian E&M sector for investors that have (access to) information and insights related to the sector based on local knowledge and expertise. The film/TV/SVOD segment in particular is ripe for private equity investment at this time. Given the demand for content in this segment and the relatively capital intensive requirements to produce same, the patient nature of private equity capital makes such type of funding a better fit than Venture Capital – which in the author’s view is better suited for music sector investments. Based on growth projections over the next five years, any private equity investments made in the film/TV/SVOD segment at this point in time will very likely see impressive returns at the point of exit (should the usual hold periods of 5-6 years apply).

Private equity firms must begin to actively look into the available opportunities and engage suitable local advisors with specialist knowledge of the sector to guide them along the narrow path towards the proverbial pot of gold at the end of the rainbow.


Olumide Mustapha is a corporate and commercial attorney with particular specialism in the telecoms, media/entertainment, and technology sectors in Nigeria and the UK. He also has deep expertise in corporate finance – both private finance and capital market funding – as well as significant management consultancy experience.

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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CBN “Naira 4 Dollar Scheme” Explained

What the CBN’s Naira 4 Dollar scheme means for your money.




In what appears to be an attempt to incentivize dollar remittances by all means possible, the Central Bank of Nigeria (CBN) released a circular to Deposit Money Banks (DMBs), International Money Transfer Operators (IMTO), and the General Public, advising that remittances paid into a bank account will attract an additional credit alert for every USD$1 received!

Yes, you read that correctly. The CBN will facilitate a special additional credit alert of N5 for every USD$1 received. In other words,

  • if someone sends you $10,000, you get an additional special credit alert for N50,000.
  • If someone sends you $100,000, you get an additional special credit alert for N500,000.

Who is eligible?

To be eligible, the diaspora remittances need to be processed and received from one of the registered IMTOs and funds received into a Bank account operated by the DMBs. (So, if you are receiving funds via Crypto sorry you are not eligible).

Additionally, the circular says this “incentive runs from Monday 8th March 2021 to Saturday 8th May 2021″. So, if you have plans to receive dollars, you can plan accordingly.

The circular is not clear how exactly the commercial banks will know which account to pay the extra special credits into. Although, that may be a question diaspora funds recipients will need to ask their DMB accounts officers to clarify for them.

How will this be funded?

The circular notes that the “CBN shall through commercial banks, pay to recipients the N5 incentive for every USD$1”. In other words, it is the CBN funding the cost of this special extra credit.

  • One would argue that given the costs of alternative incentives to attract dollars such as the special OMO window for FPI, this may be a cheaper alternative for the CBN.
  • But we will need to see the volume of expected remittance to be certain of that. Nigeria attracts about $5billion per quarter in remittances and only trails oil in terms of foreign earnings.

Why this matter to Nigerians?

Following the collapse of US Dollar inflows into the country, the CBN initially tried to balance its current account deficits and avoid an official devaluation by tackling FOREX demand (Think ban of 41 items, etc).

Finally, this short-term Naira-4-Dollar scheme will not be called an official Naira Devaluation. But a question is what do we call the new short-term price of N412.50 + N5.00? Maybe we can call it Naira Modulation.


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Nigerian Breweries leveraging, but stacking cash through rising input costs

The marathon continues for Nigerian Breweries with its 2020 financials.



Humanity might need more booze to survive the increasingly daunting intricacies of life, but Nigerian Breweries 2020 financial statement is proof that even the best can get caught up in the reality of changing business lifecycles.

Nigerian Breweries Plc had floored the market providing both alcoholic and non-alcoholic premium quality beverages across the nation. But with brands like Star lager beer launched as far back as 1949, Gulder lager beer launched in 1970, and even the family-friendly Maltina introduced as far back as 1976, it is only natural that both the old and new generation competition gives them a run for their market share.

Much like other old money companies, Nigerian Breweries has done its bit to remain relevant in the industry from creating new variants of existing favoured brands to paying dividends consistently annually for the past few years. Yet within the same period, the company’s financial statements have been a testament to its streamlined market share and reducing profits. The marathon continues with its 2020 financials. The industry giant may as well be setting itself up for a debt quagmire peradventure its projections do not match the true reality of events.

READ: How COVID-19 has changed Nigeria’s consumer goods & industrial markets –KPMG

2020 financials: A tale of higher costs & larger debts

2020’s unfavourable financial/ business environment led to the increase in the prices of raw materials and disruptions in logistics for many Nigerian-domiciled businesses including Nigerian Breweries. Raw materials and consumables witnessed a 17% increase despite the marginal growth in revenue.

While the group’s 2020 results revealed a 4.35% increase in revenue from N323 billion in the prior year to around N337 billion, these gains were curtailed by a higher-than-par increase in cost of sales which had risen by 13.9%, from the N191.8 billion expended in 2019 to N218.4 billion as its 2020 financials reveal and interest rates going way up.

READ: Flour Mills and its diverse challenges

The company’s lower operating expenses were not enough to salvage the disruption caused by the raging interest expense following increased charges paid on bank loans and overdraft facilities as well as the significant increase in overall debt. Between 2019 and 2020 alone, long term loans and borrowings increased by 974% from N4.8 billion to as much as N51.8 billion. Even trade and other long term payables increased by 35%.

In its financials, the company noted that it has revolving credit facilities with five Nigerian banks to finance its working capital. The approved limit of the loan with each of the banks range from ₦6 billion to ₦15 billion (total of ₦66 billion) and each of the agreements had been signed in 2016 with a tenor of five years. The Company had also obtained Capital and Working capital finance from the BoI in 2019.

READ: Manufacturing sector in Nigeria and the reality of a “new normal”

It is no news that the company is involved in diversified lease arrangements. Following reclassifications made in 2019 to some of its lease assets, the 2020 asset base also witnessed significant increase in Right of Use Assets which increased by 288%% from N11.1 billion to N42.9 billion. Yet, the fact that in one year, interest expense on Lease Liabilities rose from N19.7 million in 2019 and to a whopping N4.171 billion shows that the company is taking way more debt than its books require.

But what’s it using all the cash for?

Beyond rising material costs, borrowing costs have been huge and the annual interest payment by virtue of these loans make the possibility of higher profits for the company a mirage. That said, the overall increase in total liabilities might not have been such a bad idea if the funds were being used to increase revenue and profits. But having a huge chunk of all that money in cash creates a different kind of challenge. Cash and bank values in its statement of financial position significantly increased by 377% from N6.4 billion in 2019 to N30.4 billion in 2020.

Is the cash being held to mitigate possible challenges of the volatile economy or are they being used to pay dividends? Even at a share price of N52 per share, the company’s price-to-book value sits at 2.5816, testament of its dire overvaluation. Consequently, there is an ardent need for the company to come up with newer ways to attract the wider market and keep its book in the green with a little less external funding.

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