The Lancashire Telegraph said that the Premiership side dropped their interest in Al-Muhammadi as their coach Sam Allardyce believes he would be unable to make an immediate impact.
ENPPI football director Alaa Abdul-Sadek also confirmed recently that the Egyptian international would stay with the club until the end of the season.
"None of Blackburn officials contacted us," he told ENPPI's official website.
"We have no problems in allowing our players to leave but that has to be done through legal channels.
"Reports which indicated that Blackburn reached an agreement with us to sign Al-Muhammadi are totally false."
With two days remaining before the closure of the January transfer window, it seems highly unlikely that the 21-year-old would fulfill his dream of playing in the Premiership.