Lookman has been the subject of much conversation lately given that he has been in and out of the team over the past few weeks and there was speculation that the talented 20-year-old might be loaned out to get a greater guarantee of first-team football.
The diminutive attacking midfielder was signed from Charlton Athletic last year and has been a regular on the substitutes' bench this season but has only made one appearance since the turn of the year.
The arrival of Theo Walcott from Arsenal combined with the return to fitness of Yannick Bolasie has increased the competition for Lookman but Allardyce has confirmed that Aaron Lennon's recent departure means that he needs to keep his current options out wide.
"[Ademola] wouldn't be available on loan because Aaron Lennon went a few days ago," Allardyce said. So in the club's eyes we got a very good deal for Aaron whose contract was up this year.
"That leaves anybody else to go out on loan in that position a no-no really because we need the squad to be available to play."
"I think we've used 36 players this year with injuries and the amount of games that we've played, so based on the amount we've played we've got to try and keep the 25-man squad that, he's been in all season, together."
Allardyce had previously been doubtful that Everton would be signing any more players before the transfer window closes on Wednesday night but he admitted that anything was possible.
Earlier this month, the manager had cited the size of his squad as a concern which would preclude further incomings but the sale of Lennon and Ross Barkley along with the loan out of Kevin Mirallas may have provided some room.
"We're not ruling anybody in or out as it's impossible to do that," Allardyce continued. "[T]he window is open for everybody and somewhere out of the blue, which normally happens at this time, appears whether that's a player for you to bring in or whether it's a player you didn't expect to go out but is acceptable to the football club for the right reasons."
Allardyce, who said also that both Seamus Coleman and Luke Garbutt will be in the squad to face Leicester on Wednesday, confirmed, however, that there was nothing imminent in terms of outgoings because the club have only received loan offers which haven't necessarily been in Everton's interests.
"We haven't accepted any deal from any loan [offers] we've had from other clubs," he said, with Sandro Ramirez and Davy Klaassen being two players subject to interest from other teams on a temporary basis.
"Until such time as the board tell me that 'financially it's acceptable what do you think?' and then from a squad and playing point of view I say to them whether it's in the best interest of the club and player to go on loan or whether he is better staying in the squad to try and break into the first team.
"But we have got a lot of players so moving some out on loan would be a possibility, but only if it's right for the club."