Formal:
* Ma nièce préférée: This is the most literal translation, and it sounds formal.
* La nièce que j'aime le plus: This translates to "the niece I love the most" and also sounds formal.
Informal:
* Mon petit bout de chou préféré: This literally translates to "my favorite little darling," which is very endearing and affectionate.
* Ma nièce chérie: This translates to "my darling niece" and is very sweet.
* Ma nièce préférée: You can also use the formal version "ma nièce préférée" informally, but with a more loving tone.
Ultimately, the best way to say "my favorite niece" in French depends on your relationship with your niece and the context of the conversation.