Thank you for your query,
Your nephew might be having phimosis
, due to which after retraction of skin he developed bleeding because of laceration.
In this condition circumcision
is required, if not done it may lead to recurrent urinary tract
infections and obstruction to urine flow later.
Urine infections in boys above 1 year should be evaluated for the underlying abnormality for reflux.
So consult your Pediatric urologist
and plan for the circumcision and for the dye test procedure as he advised.
Hope I have answered your query.