The Aston Villa legend believes the Reds' pursuit of Benfica star Nunez is a direct response to City's signing of Erling Haaland - but suggests Jurgen Klopp also needs two midfielders to keep pace with Pep Guardiola.
Liverpool are expected to lose Sadio Mane to Bayern Munich this summer, despite rejecting two bids, the second worth around £30million.
The Reds are thought to be lining up Nunez, the 22-year-old Uruguay winger, as a possible replacement, with Benfica set to demand £85m for their goal machine, who favours a move to Anfield over Manchester United.
However, Agbonlahor suggests other holes already exist in Klopp's squad, most notably in an ageing midfield.
"Nunez is a top player," the ex-Premier League star said. "He will improve and get even better. But Liverpool need midfielders.
"Thiago has injury problems, Jordan Henderson's legs will start going now he's in his thirties.
"They need two midfielders. Jude Bellingham would fit in perfectly for them.
"In defence and in goal, they have enough cover. Two centre-midfielders and Nunez, then they'll be back challenging Man City for the title next season.
"You look at City's midfield, I think Liverpool need at least one midfielder."
Liverpool finished one point adrift of City last season following a thrilling title race - and the champions have already improved by adding one of Europe's most exciting young players to their ranks.
Haaland could take Guardiola's side to the next level - and Agbonlahor suggests Liverpool's pursuit of Nunez is a direct response.
He added: "They're going in for Nunez because City have got Haaland. He's going to be unstoppable and they're going to be unstoppable next season.
"Liverpool had to make a big statement. Yes, Mane's going. But Diaz, Jota and Salah… for me that's not enough if you want to compete with City."