There is a strong need for models that provide insight into the problems of production capacity facing start-up firms and help to identify strategies that ensure the long-term productivity and survival of such firms. The study seeks to determine the effect of production capacity on sustainable increase in productivity of agro-allied small businesses in South-South Nigeria. The instrument of data collection is the research questions structured in close-ended five-point Likert scale .The evaluation of the relationship between dependent of firm productivity and independent variables of production capacity practice was performed using the Ordinary Least Square regression technique. The study found that production capacity has a positive and statistically significant relationship with firm productivity. This implies thatproduction capacity has capacity to sustain increase in productivity among agro-allied small businesses in Nigeria. It was recommended that the government at various tiers should review business laws adverse to the survival and productivity of small businesses.; identify supportive infrastructures needed to stimulate agro-allied businesses in order to prioritise the execution of infrastructures needed to facilitate technological advancement, boost sustainable development of agro-allied small businesses and the economy as well as equipping intending investors with adequate knowledge of the agro-allied business due to the specialised and delicate nature of agricultural business in Nigeria to avoid losses of investment.