The 21-year-old, who joined the English Premier League side from Imperial Soccer Academy, spent last season on loan at Belgian side Royal Excel Mouscron.
According to the Reds, Awoniyi will remain with Jurgen Klopp’s former team for the duration of the 2019-20 campaign after the transfer was agreed on Tuesday.
Before his move to the German outfit, he has enjoyed loan spells with FSV Frankfurk, NEC Nijmegen, Royal Excel Mouscron twice, and KAA Gent.
He was part of the Nigeria squad which won the 2013 Fifa Under-17 World Cup in the United Arab Emirates, where he scored four goals.
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Also, Awoniyi represented Nigeria at the 2015 Fifa U-20 World Cup in New Zealand after winning the 2015 African U-20 Championship in Senegal.
He becomes the second African at the Opel Arena after Cameroon international Pierre Kunde.