This study investigates the effects of financial risks on financial performance of selected commercial banks in Nigeria. The existing researches on financial risk and financial performance relationships in Nigeria are sketchy and inconclusive as well as they are more focus on individual financial risk components. Data on audited financial reports of the selected sixteen (16) commercial banks listed in the Nigerian stock market have been collected for the period of 7 years (2009-2015), making up to 112 data observations. Panel data approach is employed in the study for the analytical model with the following steps: unit root test, Hausman test for random or fixed effect choice and hypothesis testing. The study use software, Stata version 13 for the analysis. The dependent variables in this study comprise of bank financial performance proxy by return on asset; operational efficiency; and net interest margin, while the independent variables consist of financial risk proxy by operational risk; credit risk; liquidity risk; and market risk. The controlled variables used in this study include bank size and GDP growth rate. Based on random effect analysis on the model, credit risk-1 (CR1) has a negative significant effect on return on asset (ROA) and net interest margin (NIM), suggesting that the lower credit risk-1, is the better the bank performance in terms of ROA and NIM. Credit risk-2 (CR2) and market risk also has a positive significant impact on NIM, suggesting that the lower credit risk-2 and market risk, is the better the bank performance in terms of NIM. The analysis also found that liquidity risk is not important determinant to the financial performance of commercial banking sector in Nigeria, as compared to operational risk. In fixed effect analysis, operational risk and market risk significantly affect operational efficiency (OE) positively, suggesting that the higher operational risk and market risk, the better the bank performance in term of OE. Hence, the findings recommend that commercial banks should adopt proactive approaches to improve risk management in order to maximize financial performance. The study contributes to the understanding of the relationship between financial risk and financial performance, evidently useful for policy makers and future researchers as referral. The study also suggests that future research might possibly examine the nexus between financial risks and financial performance with regards to other sectors of the economy and across countries comparison
