The Uruguayan international is on course to clinch the Golden Boot this season after equalling Robbie Fowler's Premier League club record of 28 goals in a campaign.
The 27-year-old, who could guide the Reds to their first league title since 1990, is also in contention for the PFA Player of the Year award.
"Luis has got everything," Agger told the Liverpool Echo. "He is right up there with the best. What he does on the pitch is just unbelievable. Every team in this league is afraid of him and rightly so.
"Without a doubt, he has to be Footballer of the Year. It's not only his goals and his assists, but also his work rate for the team."
Liverpool, who will take on Sunderland this evening, are currently third in the Premier League table, four points adrift of leaders Chelsea.