The 25-year-old has started just one Premier League game for the club since the start of the 2015-16 season following a spate of serious injuries.
Wilshere spent most of last season on loan at Bournemouth but completed 90 minutes in Arsenal's 1-0 EFL Cup win over Doncaster Rovers on Wednesday night.
The midfielder's contract expires in the summer, prompting Nicholas to declare him better than three players seemingly ahead of him in the team's pecking order.
Nicholas told Sky Sports News: "None of us, in all honesty, think he can get back to where he was four or five years ago because the injuries have been so severe, but if he can get close to that then he's still worth keeping.
"Is he a better footballer than Granit Xhaka? Yes. He's certainly better than Mohamed Elneny and Francis Coquelin, and things are starting to fall in place for him where he's going to get opportunities.
"Even Tottenham fans would have to acknowledge he's shown remarkable determination to bounce back again and he's got too much talent for Arsenal to give up on him. Put it this way, I'd much rather Wilshere was on the bench than Elneny or Coquelin."
Wilshere is not expected to play against West Bromwich Albion on Monday night but is likely to feature on Thursday against BATE Borisov in the Europa League.