Structural Transformation of Smallholder Agriculture and the Dynamics of Rural Poverty in South West Nigeria: A General Equilibrium Analysis

The relationship between structural transformation in agriculture and rural poverty dynamics remains a contested and empirically complex question in the development economics literature, particularly in the context of sub-Saharan African economies undergoing rapid demographic change. In South West Nigeria, simultaneous processes of agricultural commercialisation, rural-urban migration, and value chain industrialisation are reshaping smallholder livelihoods, yet their aggregate poverty implications have not been examined through a general equilibrium lens. This study constructed and calibrated a computable general equilibrium model for the South West agricultural economy, incorporating detailed household disaggregation by farm size, gender, and market participation status. Econometric estimation of structural parameters using household panel data from 520 farming households across Oyo, Osun, Ekiti, and Ondo States provided the empirical foundation for model calibration. Simulation results demonstrated that agricultural productivity growth policies had positive poverty reduction effects but generated distributional trade-offs favouring commercially integrated households. Labour market tightening associated with structural transformation created new welfare pathways for landless rural workers but introduced food price instability risks. The study makes an original methodological contribution by integrating smallholder heterogeneity into a South West Nigeria-specific computable general equilibrium framework, filling a significant gap in regional agricultural policy analysis tools. Policy simulations suggest that complementary social protection and market infrastructure investments are essential for ensuring inclusive structural transformation outcomes. Keywords: structural transformation, rural poverty, computable general equilibrium, South West Nigeria, agricultural commercialisation.