Abstract: The study investigates the effect of foreign aid on agricultural growth during 1970-2007. Employing a simultaneous equation system with agricultural growth, savings, aid and agricultural imports as endogenous variables, it finds that foreign aid has a significant positive effect on agricultural growth in Nigeria. However, the results do not support the view that foreign aid flows more to countries with low savings. Moreover, the view that aid flows generate increased imports by recipient countries is not supported by the findings of this study.