The Reds have been heavily linked with the Egypt international for some time, with Goal reporting in May that attention had shifted in his direction after the club gave up on Bayer Leverkusen’s Julian Brandt.
He would add another attacking option to Jurgen Klopp’s ranks at Anfield, but Nicol feels there are other areas in greater need of strengthening, with it difficult to see how Salah would integrate into a fully-fit squad.
"It is a lot of money, yeah," the former Reds defender told ESPN FC.
"It's a lot of money for Liverpool to buy a player, who, if everybody is fit, I don't think starts.
"You play [Philippe] Coutinho on the left, you play [Sadio] Mane on the right.
"I don't think you play Salah through the middle, that means he doesn't start.
"As far as the squad, obviously Liverpool are in the Champions League yes, but for £40m? I don't think so."
Salah made just 19 appearances for Chelsea, netting two goals.
He has, however, found the target 34 times in 83 appearances for Roma, while he also provided 11 assists in Serie A competition throughout the 2016-17 campaign.