The homemade flag was one of several placed on a bonfire in a car park outside a leisure centre in the Northern Irish city.
Large bonfires are burnt on July 11 each year by the Loyalist community in Ulster to commemorate the arrival of William of Orange in 1690 the night before the battle of the Boyne.
A message on the banner read: “Scott Sinclair loves bananas.”
Images of the racist banner were widely circulated on social media, but has since been removed, according to The Irish News.
The Police Service of Northern Ireland (PSNI) said it is investigating complaints about “various materials” placed on the bonfire.
“Where police are aware of a crime being committed, an investigation will follow,” it said.
“We take hate crime very seriously and actively investigate all incidents reported to us. Hate crime is wrong on all levels and the PSNI will do everything it can to ensure that everyone, from whatever background, can live free from prejudice, fear and discrimination.”