Unsubstantiated reports from Spain have linked the Egypt international with a move to the Bernabeu after a stunning start to the campaign, in which he has netted 24 goals in all competitions barely seven months into his Reds career.
Salah's national team president Hany Abo Rida and manager Hector Cuper have both claimed that Real will make a summer bid for the ex-Chelsea and Roma winger, while former Zamalek chairman Mamdouh Abbas claimed he would be worth up to €150m (£134m, $179m) if he scored 20 times this term.
Coutinho's £142m move to the Nou Camp has raised fears Liverpool could be vulnerable to bids for other star players but Nicol – a five-time league champion at Anfield – believes Salah's departure is unimaginable.
"Liverpool have just sold Coutinho, which I think this time around was probably the right thing to do. You can't, under no circumstances, let Salah go now as well," he told ESPN.
"It makes no sense from Liverpool's point of view. Certainly from Salah's point of view it is a step up, you're going to the champions of Europe, but is it not going to happen."
One player who is all-but-certain to follow Coutinho out of the Liverpool exit door this month is striker Daniel Sturridge, who is being linked with a loan move to Inter Milan or Sevilla.
The England international has played just once in the Premier League since October and no longer figures in Jurgen Klopp's long-term plans, with Roberto Firmino and Dominic Solanke ahead in the pecking order.
Inter are reportedly willing to pay Sturridge's hefty £150,000-a-week wages for the rest of the season and have offered the Merseysiders a "significant" loan fee. Nicol has urged the 28-year-old to accept the move.
"Daniel Sturridge: I can't believe he is still there," the Scot added. "He has to go he doesn't play. At the end of the day footballers want to be on the field playing and I can't remember the last time he played so he has to go."