The International Monetary Fund IMF has warned that Nigeria and many other crude oil producing nations that any further fall in the price of the product may spell doom on their economies, which underscore an urgent need for economic diversification from the current over-dependence on crude oil as the only source of foreign exchange.

The price of crude oil at the international market as at Tuesday was about $68 per barrel as against the less than $30 per barrel, which the product sold about two years ago, a development that the Nigerian government and other countries complacent again, thus depending heavily on proceeds from oil to embark on some drastic economic policies such as upward readjusting of their budgets and devaluing their currencies, among several other measures.

The Fund spoke against the backdrop of the relative economic stability being enjoyed by these economies arising from the increase in the price of crude oil. It also warned Nigeria’s financial authorities against the rising cases of bad assets in the banking industry and the need to check same to forestall exposing the nation’s financial system to avoidable risks.

Economic Counselor and Director of the Research Department of the IMF, Maurice Obstfeld, who briefed the media on the World Economic Outlook (WEO), at the on-going IMF/World Bank Spring meetings in Washington DC, Tuesday, warned of an imminent doom should the international crude oil market experience glut again that might give rise to fall in price.

“Many commodity exporters will not be so lucky, however, despite some improvement in the outlook for commodity prices. Those countries will need to diversify their economies to boost future growth and resilience,” Obstfeld said.

The Fund also projected in its WEO that inflation in sub-Saharan Africa would moderate slightly in 2018 and 2019, but is expected to remain in double digits in key large economies, reflecting the pass-through effects of currency depreciation and their impact on inflation expectations (Angola), supply factors, and assumed monetary policy accommodation to support fiscal policy (Nigeria).

The IMF advised oil-dependent economies, including Nigeria, to intensify economic diversification as the global body foresees the crash of crude oil prices in the near future.

“Some low-income countries like Mozambique and Nigeria have experienced financial stress or deteriorating loan quality in recent years as growth has moderated and corporate balance sheets have weakened.

“Further deterioration in loan quality would impair credit intermediation and ability of the banking sector to support growth, which would raise the risk of cost recapitalisation and severely burden the already strained public finances,’’ the IMF said.

IMF’s Economic Counselor and Director of the Research, however, said: “There is room to strengthen the current system rather than risk bilateral fragmentation of international trade. Plurilateral arrangements, if consistent with multilateral rules, can also provide a useful springboard to more open trade.

“Each nation can do much more on its own to promote stronger, more resilient and more inclusive growth. Multilateral cooperation remains essential, however, to address a range of challenges in addition to the governance of world trade.

“Economic diversification away from excessive dependence on commodities, or on a few sectors such as agriculture or tourism, is an overarching imperative for commodity exporters and those countries that are particularly exposed to natural disasters.

“While there is no unique template for all circumstances, general policy attributes that facilitate diversification or help countries cope with climate shocks include sound macro-management and judicious use of policy buffers to smooth fluctuations, investment in education and training to improve workforce skills, increased access to credit and a reduction in infrastructure gaps.”

Meanwhile, IMF’s Deputy Division Chief of the World Economic Studies Division, Research Department, Malhar Nabar, also said a lot of economies in Africa were benefiting from the improvement in commodity prices.

According to him, this had also led to improvement in financial conditions in a number of countries in the region, with some of them accessing the Eurobond market.

He said that the recent escalating tension over trade (United States vs China) presented a growing risk for global financial stability.

The Fund noted that some low-income countries, including Mozambique and Nigeria have experienced financial stress or deteriorating loan quality in recent years as growth has moderated and corporate balance sheets have weakened.

“Further deterioration in loan quality would impair credit intermediation and the ability of the banking sector to support growth in these countries and would raise the risk of costly recapitalization, which would severely burden already-strained public finances,” the IMF said in the report.

“Proactive supervision, ensuring adequate provisioning for losses by banks, reducing forbearance, and improving resolution frameworks to minimize expensive public bailouts are essential for strengthening financial resilience.”

While also speaking at the event, Nigeria’s Chairman of House of Representatives Committee on Banking and Currency, Jones Onyereri, lamented bank’s rising Non Performing Loans (NPLs), saying it was embarrassing and called for urgent measures on the part of the regulatory authorities to address the malaise.