Financial derivatives usage and financial performance of listed non-financial firms in Nigeria

Purpose: Firm performance remains a fundamental indicator of economic stability and corporate sustainability, particularly within emerging economies where firms operate under volatile macroeconomic conditions. Meanwhile, the adoption of financial derivatives as risk management instruments has gained increasing attention as firms seek strategies to stabilize earnings and enhance financial outcomes. Hence, this study examined the effect of financial derivatives usage on financial performance of listed non-financial firms in Nigeria. Methodology: The study adopted an ex-post facto research design and relied on secondary data obtained from annual reports and disclosures of firms listed on the Nigerian Exchange Group (NGX) covering the period 2015–2024. The population consisted of 104 listed non-financial firms, from which a sample of 83 firms was selected using a multi-stage sampling technique, giving 830 firm-year observations. Panel regression analysis, particularly the fixed-effect model, was employed for data analysis after conducting relevant diagnostic tests. Results: The findings revealed that foreign exchange derivatives, forward contracts, and option contracts exert a positive and statistically significant influence on firms’ financial performance, while interest rate derivatives showed a positive but statistically insignificant impact. Conclusion: The study therefore concludes that financial derivatives serve as important risk management tools capable of improving the profitability of listed non-financial firms when effectively utilized. Policy implication: the finding implies that firms should adopt an integrated financial risk management approach by strategically utilising foreign exchange derivatives, forward contracts, and option contracts to manage currency risk, stabilise cash flows, reduce transaction uncertainty, and enhance overall listed non-financial firms’ financial performance in Nigeria’s volatile economic environment.