Which merge to focus on?

If they're both fully built (three skills, special, assist, etc) Fae would probably get more points than Nino, since she has higher BST.

Depends on who you need more. I'd personally go with Nino. She's much more useful in my opinion, and she can do a lot of damage because of her tome. Fae is a good unit, but she's a dragon that's weak to Falchion, Naga, or just red units in general.

Did I mention she's a dragon? I don't necessarily like Dragons in FEH, but that's just me.

I'd say Nino. Although Fae has higher BST, she is very weak to Naga and Falchion. Plus, said sword is getting a weapon refinement soon, so I'd build to be safe in case they start to run crazy.

Nino is a staple for most tier 20 users. I’d say stick with her.

To me, it depends on what fodder you have for your Fae. With the Steady Breath / Aether build, Fae can be the cornerstone of your arena team. There are other effective builds; but none of them give you the coverage and scoring of that particular setup.

If you can't or won't run that build, Nino is an absolute destroyer and shockingly resilient at higher merges.

Falchion users are getting buffed, and since all of them are red, it means Fae is going to have a harder time having a spot in higher tiers, especially with Myrrh being out also. Nino is a good, and staple unit to have anyways, so I'd say go for Nino.