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Nyoni trained primarily with the senior squad this season, but tended to play for the Under-21s.
The youngster featured in 15 of the 20 Premier League 2 fixtures and also played in the Uefa Youth League.
Nyoni, who was an unused substitute in four Premier League matches, started in the Carabao Cup victory over Southampton and February’s shock FA Cup loss at Plymouth Argyle.
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Viewed in the same criteria as youth graduates James McConnell and Tyler Morton, Nyoni could play a greater role in the first team next season.
Having signed a first professional contract in October, his extension than a year later underlines the club's trust in him
“It means a lot - obviously, supporting the club from young as well, so it’s a great feeling,” the teenager told Liverpool's club channels, in his first words after the extension was confirmed.
“But, obviously, now I have to go out there and show why I have earned this contract.
“I think it’s just step-by-step, day-by-day, just becoming better every day, just improving as a player.
“I’m still young
There’s a lot of improvement [to be made]; that’s the most important thing, just to repay them in that way.”
Nyoni, who has featured for England at youth level, is comfortable playing as a holding midfielder, in a box-to-box role, or in more offensive areas.
Nyoni is also the fourth-youngest debutant in Liverpool’s history.
Nyoni is expected to play some role in Liverpool’s summer preseason games, as he did last year, when he scored in a friendly win over Sevilla at Anfield.
The Reds face Preston North End on July 13 before jetting out to Asia for games against AC Milan and Yokohama FM