The Gunners invested £26 million ($34m) in the highly-rated Torreira in the summer of 2018.
They were buying into ability for the present and potential for the future and were careful to ease the 22-year-old into Premier League life.
He is considered by many to have flourished during his short time in England , making 29 appearances and scoring two goals.
Merson, though, believes the South American is merely adding energy and bite to the Arsenal side and would not be sought-after by other leading sides if he were to be made available.
The ex-Gunners star told Sky Sports : “Arsenal are now showing their true colours. Until they sort out the defence, they won't be able to achieve anything.
“Unai Emery will need a few windows to sort it out but the players they've purchased haven't been great.
“Everyone was raving about Lucas Torreira, but he's not that good.
“I said this a few months ago and everyone kicked up a stink. He only looks good as he's what Arsenal have needed for a long time, someone to run around and put their foot in.
“But, if you put him up for sale tomorrow then none of the top five clubs in the Premier League would be interested.”
With that rather scathing assessment in mind, Merson believes Arsenal should be among those considering a raid on Watford for a French midfielder who has already been linked with Paris Saint-Germain and Liverpool.
He added: “They should sign Abdoulaye Doucoure at Watford - he'd walk into the team.
“I'd take him tomorrow morning. He's a much better player than Torreira and he scores goals.
“He's one of the most under-rated players in the Premier League - he could play for any of the top six.
“It seems no-one pays attention to him because he plays for Watford and fans will say, 'Why are we buying him, he's at Watford?' - but he's a proper player.”
Merson added on the speculation which continues to surround another midfielder in north London: “Is there any way back for Mesut Ozil? You'll have to ask him.
“Arsenal won't be able to buy anyone until they can get him off the books.”