Have you looked at the full dictionary entry?
nĕpos , ōtis, m. and f. (v. infra) [Sanscr. nap-tar, descendant; Gr. ἀνεψιός, nephew; cf. νέποδες; cf. neptis, Germ. Neffe],
I.a grandson, son’s or daughter’s son: primo gradu sunt supra pater, mater; infra filius, filia. Secundo gradu sunt supra avus, avia; “infra nepos, neptis,” Dig. 38, 10, 1; cf.: “nepos quoque dupliciter intellegitur, ex filio vel filia natus,” ib. 38, 10, 10, § 13; Cic. Deiot. 1, 2: Metellum multi filii, filiae, nepotes, neptes in rogum imposuerunt. id. Tusc. 1, 35, 85: “Q. Pompeii ex filiā nepos,” id. Brut. 76, 263: “M. Catonis censorii ex filio nepos,” Gell. 13, 20 (19), 3; Dig. 44, 4, 18: “sororis nepos,” Tac. A. 4, 44.—
2. For neptis, a granddaughter (ante- and post-class.): Ilia dia nepos, Enn. ap. Charis. p. 70 P. (Ann. v. 56 Vahl.); Inscr. Grut. 477, 5; ib. 678, 11.—
B. Transf.
- A brother’s or sister’s son, a nephew (post-Aug.): “tres instituit heredes sororum nepotes,” Suet. Caes. 83; Hier. Ep. 60, n. 9; Eutr. 7, 1.—
- In gen., a descendant (poet.): “filius an aliquis magnā de stirpe nepotum?” Verg. A. 6, 864: “in nepotum Perniciem,” Hor. C. 2, 13, 3: Caesar, ab Aeneā qui tibi fratre nepos (to Cupid), Ov. P. 3, 3, 62: “magnanimos Remi nepotes,” Cat. 58, 5; Luc. 7, 207: “haec tetigit tuos urtica nepotes,” Juv. 2, 128.—
- A favorite: omnes profecto mulieres te amant … Py. … nepos sum Veneris, Plaut. Mil. 4, 6, 50. —
- Of animals (post-Aug.), Col. 6, 37, 4; 7, 2, 5.—
- Of plants, a sucker, Col. 4, 10, 2; 4, 6, 5.—
C. Fig., a spendthrift, prodigal (syn.: “ganeo, asotus): quis ganeo, quis nepos, quis adulter?” Cic. Cat. 2, 4, 7: “in populi Romani patrimonio nepos,” id. Agr. 1, 1, 2: “profusus nepos,” id. Quint. 12, 40: “quantum simplex hilarisque nepoti Discrepet,” Hor. Ep. 2, 2, 193; 1, 15, 36.
As you can see the use of nepos as nephew is post Augustan. In poetry it means a descendant, etc etc.
The meaning of words changes over time. As you can see the base meaning is descendant from which more specialised uses evolved.
When you use the english word nepotism do you only have in mind favouritism towards nephews? Words even simple ones are slippery. A lot depends on context.