the niece meets the relationship test to be a qualifying child to your wife (the daughter to either a brother or sister of hers). Evidently her parents didn't have custody but her grandmother did. if I'm correct about the relationship this requires that your wife must have custody for over 1/2 the year based on nights with her. this test is not met for 2022 so you can not claim her as a dependent.
in 2023 the same rules apply.
