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Nollywood springs surprise in GDP rebasing, leaps to N9trn

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Story:  Onyinye Nwachukwu

A major surprise that would be thrown up when the rebased Gross Domestic Product (GDP) numbers are finally released on Sunday is how Nigeria’s Nollywood industry, now captured under “Motion pictures, sound recording and music production,” has made a huge leap to about N9trillion in size.

Analysts had said the movie segment made about N1.72 trillion in 2013.

‘Motion pictures, sound recording and music production’ is one of the 13 new activities that have been included in the computation framework. Others are entertainment, research, patents and copyrights etc. The number of economic activities reported in the rebased GDP computation framework was increased to 46 as against to 33 in the previous series.

A source closely monitoring the rebasing exercise told BusinessDay yesterday that the huge leap shows how the entire entertainment sector had been hugely underrated over the years.

The sector was earlier classified within an item -”other services” that barely contributes N5  billion to annual GDP.

He said the share has risen sharply from what was considered insignificant under services, to become the first five.

“What surprises me the most, is the ‘Motions pictures, sound recording and music production’, which jumped to N9 trillion, which is a huge amount. I didn’t expect that kind of jump. Initially it was under ‘other services’ where items that are too small are captured during GDP computation,” the source said.

The exponential growth of Nollywood has been attributed to enhanced production and content quality of Nigerian films, stemming from growing professionalism, and analysts said  the industry made an average of N1.72 trillion in 2013.

In the last five years, the industry has been growing in terms of quality, and has been rated the third most valuable movie industry in the world, behind Hollywood and Bollywood. The development has also impacted on returns.

Just as it has ranked third globally in terms of quality of production, it has grossed revenues that placed it third in the world.

Robert Orya, managing director, Nigerian Export-Import Bank (NEXIM), said last year, Nollywood ranked third globally in revenue. According to him, the revenue the film industry has generated in the last three years was between $300 million and $800 million.

“The global film and entertainment industry generated about $90.6 billion revenue in 2010,” Orya explained, saying “the revenue increased to $102.7 billion in 2012. Most of these revenue streams are from theatrical distribution. North America contributed the largest market share of about 40 percent. Europe, Middle East and Africa accounted for 24 percent, Latin America 20 percent, and Asia Pacific made only 3 percent contribution.”

Victor Okhai, film maker, says a new crop of film makers began to bring professionalism into the industry in the past few years.

The rebased DGP numbers would also expose Nigeria’s huge untapped tax base, especially in the non- oil sector that is hardly paid attention to. The source projects that the total rebased GDP size could stay around N51 trillion.

He explained that crude is just about N10 trillion or 20 percent of this N51 trillion GDP, meaning that if the government could just put more effort at tax collection systems from the remaining N41 trillion in non-oil, it will not be dependent on oil for income, which is a key benefit of diversification.

The Federal Inland Revenue Service (FIRS) generated N4.8 trillion tax revenue in 2013, some 17.18 percent below its N5.80 trillion target.

The Service projects N4.21 trillion collection for 2014, made up of N1. 789 trillion expected from petroleum profit tax; N1.03 trillion for companies income tax with N96 billion for Company Income Taxes.

The Service also projects a collection of N861bn from  Value Added Tax; N10.21bn from capital gains tax; N8.46bn as income from duties, while education tax, personal income tax and technology levy are expected to contribute N156bn, N59bn and N10.6bn respectively.

“If you are able to tax that N51 trillion, your tax is 10 to 20 percent, so just from the N40 trillion or thereabout, you can get at least N8 trillion additional revenue to government outside the oil sector,” the source explained.

The source explained that the benefit of GDP is not accruing to government revenue and there is need to find a way of doubling and tripling non oil revenue tapping into taxes.

Meanwhile, the source disclosed that in the rebased GDP, Agriculture output increased because a new frame was used in the computation.

He said mechanised farming, even though they those practising it  are small in number, is growing much faster than the subsistence farming, which however still has the larger share in terms of output.

Crude, petroleum and natural gas also increased because there is now data on gas that has been incorporated.

The GDP for textiles decreased slightly because there was a slight decrease in GDP for two years- in 2010 and 2011 when it dipped, before coming up in 2011 and 2012.

Nigeria’s current base year is 1990, but a new base year of 2010 has been selected for the rebasing exercise. It is expected that by 2016, the GDP will be rebased again, using 2015 as base year.

This is the first time Nigeria’s GDP estimates will be rebased in almost a quarter century. The last exercise was done in 1990.

The results would indicate that the structure of the Nigerian economy has changed significantly, leading to a decline in the share of agricultural sector and a rise in the share of services.

The economic activity with the most notable changes, according to the source is wholesale and retail trade, which changed significantly between the old and new GDP series.

On what the numbers say of the Nigerian economy, our source noted that the Nigerian economy is more diversified than has been thought, though not as much impressive, because the top five still constitutes about 70 percent.

He said the results of the rebasing show the slow transformation of the Nigerian economy.

“The economy is vibrant, inspite of the challenges. It shows that if we pay attention to the numbers properly and on time, we will resolve a lot of our problems.

“The numbers tell us that Nigerians are extremely enterprising. It shows that despite our challenges, Nigerians are very resourceful.

“You can imagine if government can now harness the full potential of the country by solving some of these problems, how big the economy can be.It shows also where the country’s strength lies, where we should deploy our limited resources, to get comparative and competitive advantage.”

Article Credit: BusinessDay newspaper

Updated 5 Years ago

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Tags:     Gross Domestic Product (GDP)     Nollywood     Motion pictures     Robert Orya     Nigerian Export-Import Bank (NEXIM)