I don't want you to go too long without an answer.
The dog is treating the baby the same way she would a puppy. If the baby does something the dog feels is not permitted or unacceptable, the dog reprimands the baby. Right now the dog is growling and nipping to show its displeasure, The baby is now a bit older and the dog might start reprimanding in a more physical manner such as a real bite. So you have to stop this now.
I would start teaching your dog to stay a certain distance away from the baby. You will leash your dog and if the dog gets within 3 feet of the baby, you will give the dog a short tug on the leash and a firm, low toned NO. Since she hasn't been kept away from the baby, it may take a bit of training before she realizes that she is no longer allowed near the baby. Once she starts stopping the required distance from the baby, start rewarding her with a tasty treat like a thin hot dog slice. At this point you will see her stopping long before she gets to the baby. It is important that you reward this behavior with both treats and praise. Once she has it down pat, you can start sometimes just using praise and sometimes treats so she doesn't know if she is getting treats or not.
At this point, you will want to teach her to move if the baby gets within 3 feet of her. So you will move the baby into her space and then using the leash move her away from the baby the required distance and give a treat. Since she already know she isn't supposed to be close to the baby, it may only take a couple of times before she sees that she needs to get up and move if the baby enters her space. Since treats are involved, they usually learn quickly. Again, treat for desired behavior. Keep them paper thing and tasty. No store bought treats. This is important because the baby is on the move so she needs to move away.
Most of the dogs that I have trained have learned within a few weeks but the owners worked with the dogs daily and were very consistent. Once your baby is around 3 years of age, then the baby should be able to say sit and down with a little conviction. At this point, you will start the baby giving the dog known commands to teach the dog that she has to obey the child as well. She seems to already know about the older kids but they were older than her initially.
Your nephew is younger and would have been treated as a baby at first and now as a baby maturing who needs to be taught how to interact with others. Now the baby needs to be taught how to interact with dogs as well. Read more on this here:
You might also work on obedience training with her as well. The following site is helpful in helping owners train their dog. Be sure and click on the link to the page on obedience at the bottom. and links on subsequent pages leading to detailed instructions.
Training works best if you train at least 30 minutes a day (two 15 minute sessions). I would start making your dog work via the Nothing in life is free program (NILF). It is outlined below.
I hope this information is helpful to you. If you would like any additional information or have more questions please don’t hesitate to press the reply to expert or continue conversation button so I can address any issues you still have . If you do find this helpful, please take this opportunity to rate my answer positively so I am compensated for my time.