Where I am from, it is considered extremely normal for siblings to host showers, bridal or baby. Honestly, I look forward to the day when I can host for my sister. We mostly see it as an excuse to get together and socialize, although gifts are included.
OP, if you are uncomfortable with it being a "shower" consider changing it to a "social hour" or "tea time." You may still receive gifts, though there would be more implication that it is not a gift grab.
I would say that only family should be invited to keep it small, especially if this is your niece's first time ever hosting an event.