"Following intelligence report, we discovered and stormed on Friday a baby factory in Akute district of Ogun state," a police spokesman, Abimbola Oyeyemi, told AFP.
In the home they found the suspected operator and eight pregnant girls, most of them under the age of 20, he said.
It is the latest discovery of a so-called 'baby factory' and the first known case in southwest Nigeria.
The Guardian newspaper in Lagos published on its front page Saturday a picture of the eight girls, showing their protruding bellies.
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Southeast Nigeria is grappling with a human trafficking epidemic, with a series of black market maternity homes discovered in the last two years.
In most cases, young women have run to such homes to avoid the stigma attached to pregnancies conceived outside marriage.
The buyers are most often couples who have been unable to conceive and male children typically earn a much higher price than baby girls.
Human trafficking is widespread in West Africa, where children are bought from their families to work in plantations, mines and factories or as domestic help.
Others are sold into prostitution, and less commonly they are tortured or sacrificed in black magic rituals.