FINANCIAL DERIVATIVES AND THEIR USE IN RISK MANAGEMENT (A STUDY OF FIRST BANK OFFA, KWARA STATE)

ABSTRACT This study examines the role of financial derivatives in risk management, focusing on First Bank Offa, Kwara State. Financial derivatives such as forward contracts, futures, options, and swaps are critical instruments that help organizations manage exposure to financial risks. This research investigates how First Bank Offa employs these derivatives to mitigate risks and improve financial performance. Using the Chi-square method of data analysis, the study evaluates the effectiveness of these instruments in reducing market, credit, and operational risks. Data were collected through primary sources, using structured questionnaires. The findings suggest that the strategic use of financial derivatives significantly contributes to minimizing risk exposure, thereby enhancing the bank’s financial stability. The study also offers insights into how Nigerian banks can strengthen their risk management practices through the effective use of derivatives. The Nigerian banks are therefore advised to regularly review the pricing of financial derivatives to ensure they provide a reasonable estimate of value.