Are the basics in place?
Stable place to live, room for the child to sleep and play? I don't mean a 5 bed house with stables and ponies in the garden, I mean not a houses of multiple occupancy shared with alcoholics / other risky people.
Is that home reasonably clean and tidy. Is there room for an appropriate bed for the child. If the house is full of holes he's punched in the walls or doors, say, that's really not a great sign.
Stability for your nephew is essential - reliable income for one thing (benefits, employment, whatever). Can he demonstrate he's capable of parenting a child who is currently more vulnerable than is usual - ie isn't struggling with drink or drugs, has a support network available if he needs things like moral support, emergency shopping dropped off for a sick child, whatever? The better the network, the better for your nephew and his son.
Can he demonstrate that he's capable of doing things like showing up on time, clean, not intoxicated etc for appointments with social services and other agencies without lots of excuses?
Does he understand the current needs for the child - appropriate diet, medical needs, how much sleep, bathing and teeth brushing, daily routine that works for the age of the child (I appreciate he doesn't have the kid enough to know their daily routine right now). What enrichment does the child need at this age - does he understand how to meet their needs for this? Toys, money etc aren't all the right answers - it could be about bedtime stories, tummy time, repeating words and phrases to help with speech - whatever is age and stage appropriate.
It's a whole new world for him if he hasn't had to be solely responsible 24/7 for the child before and he'll want to ensure every element of his own life is looking good plus adding in the child and all their needs.