This study examined the impact of derivative instruments on risk management in the Nigerian banking sector, between 2014 and 2018. Ordinary least squares (OLS) model was employed to analyze data and draw inference; data used were elicited from Central Bank of Nigeria Statistical Bulletin of 2018 and Nigerian Stock Exchange Statistical Bulletin of 2018. The study employed foreign exchange derivative as proxy for derivative instruments (independent variable), while exchange rate was employed as a measure of risk management in the Nigerian banking sector (dependent variable). The inferential result suggested that financial derivative impacted positively and significantly on risk management in the Nigerian banking sector.