Arsenal are continuing to work on a club-record deal for winger Nicolas Pepe, with Lille lining up Watford forward Dodi Lukebakio as a possible replacement for the Ivorian.

Arsenal are in advanced talks with Lille over a £72million deal for Pepe that would be paid in instalments so as to fall in line with the Gunners’ modest £40m transfer budget this summer.

The winger, who scored 22 goals in Ligue 1 last season, was in talks with Napoli last week but Arsenal have now moved ahead of them in the race for his signature.

Paris Saint-Germain have been interested in the Ivorian in the past, who has also shown a desire to play for them, but it is understood he is not currently on the radar of the club’s sporting director Leonardo.

Arsenal will hope that stance does not change and they are therefore able to tie up a deal for Pepe this week.

The Gunners have been chasing a wide forward all summer and had been targeting Wilfried Zaha of Crystal Palace.

The Eagles are demanding a similar fee to that of Pepe, but unlike Lille they want a large portion of the transfer paid upfront.

Lille, on the other hand, are happy to receive the money for Pepe over a number of years as it will ensure they comply with the financial checks enforced by the Direction Nationale du Controle de Gestion, the organisation responsible for monitoring and overseeing the accounts of professional association football clubs in France.

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The French club are bracing themselves for the departure of Pepe by looking at possible replacements and Lukebakio of Watford has emerged as an option.

The Belgian spent last season on loan at German side Fortuna Dusseldorf and he impressed, scoring 13 goals.

Lille view him as an ideal replacement for Pepe, but they face competition from several Bundlesliga teams - such as Hertha Berlin.

Watford are understood to be ready to sell the 21-year-old, but it would take a fee of around £15m to get him out of Vicarage Road.

His departure, however, would help the Hornets fund a move for Rennes winger Ismaila Sarr - who is a primary target for them in the current transfer window.

Talks are currently talking place with the French side and any deal is likely to be worth around £25m.