West Ham are known to be on the hunt for a new front man, and reportedly feel that Dembele would be a great addition.
Whether Slaven Bilic’s side will meet Celtic’s asking price remains to be seen, but Nicholas feels that Dembele should not even be considering a move to the London Stadium at this moment in time.
"I'd just say if Moussa does go, make sure it's the right club. I can speak with experience on this," Nicholas said. "I had a lot of clubs after me as a young lad.
"Are West Ham the wrong club at this time? Absolutely.
"It is a team surrounded by mayhem at home. They have got a new stadium, but fight and argue and scrap with each other.
"If Dembele is looking at them, then who is his partner going to be? Who is his supplier going to be?
"There is no rhythm to that team. Dimitri Payet, their best player, has just confirmed he doesn't want to be there.”
Dembele’s stock has risen since his move to Celtic, as he has been in absolutely brilliant form.
The French forward has netted 19 goals already this term, and he has quickly become regarded as one of the most talented players in Scotland.
Celtic boss Brendan Rodgers has always insisted that Dembele will not leave Parkhead in January, but there are already suggestions that his stay in Glasgow will not be a particularly long one.
As well as West Ham, the likes of Manchester United and Manchester City are also credited with an interest in the former Fulham striker (Daily Express).