The case has been made for the need to develop a theory of policy intervention applicable to the peculiar circumstances of a developing economy. Towards this end a model has been developed that ascribes definite character to the agriculture-industry interrelationship in terms of the two sectors being engaged in theoretic ‘embrace’ that leads to the lack of economic progress. The Nigerian case provides the qualitative empirical base for substantiating the main proposition and postulating the several hypotheses. It is established that the critical elements of the farm enterprise are affected by the character of agriculture-industry interrelationship as it were, while the framework of analysis gives indications of new demand on the management capacity of farm-firms in particular. And, given the preponderance of small farms together with the strong family character and resource - poverty situation, the need for policy instruments at micro, meso and macro levels for upgrading farm management capabilities in developing economies becomes much clearer from the analysis. The role of farm management extension is most crucial among the possible modes of policy intervention for this purpose.