Smallholder farmers in Nigeria with total farm holdings of less than 5 hectares constitute about 70 percent of the farming population and produce most of the food crops and thereby contribute to food security and poverty reduction. Inspite of their contributions, they still have the challenges of globalization and liberalization which require producers compete in the markets hence commercial agriculture has come to the rescue which theoretical terms is associated with market oriented production. The objective of this paper is to review the environmental impacts of commercial agriculture in Nigeria. It presents an overview of the Nigeria’s commercial agriculture, its prospects and opportunities. It also highlights the hidden (environmental, economic and indirect) costs of commercial agriculture. The appropriate policies and prospects that can enhance rapid development of commercial agriculture were also mentioned. The paper recommends that the Nigerian authority should create the enabling environment for favourable macroeconomic policies, competent government administration, adequate infrastructure, political stability and a strong human capital base to move the country from subsistence level to commercial agriculture.