Steve Cooper’s side has already signed another Nigerian, Taiwo Awoniyi during this transfer window and is looking to add Dennis to their squad.
Dennis scored 10 goals and recorded six assists in 33 league appearances for Watford last season.
The Hornets were, however, relegated to the Sky Bet Championship despite his scoring prowess.
A number of clubs including Everton and Villarreal have been credited with an interest in the Nigerian international.
Watford reportedly wanted around £25 million for the 24-year-old.
Nottingham Forest has already spent in excess of £70 million on new players this summer.