I have a slightly different problem. I have nicknames entered for many of my contacts, but when I pull up a contact, the nickname is not displayed. When I click edit, the nickname is there. When I go back, the nickname is still not displayed. Strangely enough, the nickname does display for a few of my contacts. Even stranger, if I enter a nickname in the search box, it finds the contact. So the data is there, it simply isn't shown for many of my contacts. This was never a problem with my iPhone 4S running iOS 6. As of yesterday, I am now using an iPhone 6 running iOS 8. This is when I noticed the problem.
As an aside, I use Nicknames instead of Groups. For instance, I input the nickname "Contractor" for all my painters, electricians, plumbers, etc. When I want to see a list of my contractors, I do a search for "Contractors". It works nicely. The only reason I do this is because 1) you can't add Groups on the iPhone and 2) you can't add a contact to a Group on the iPhone. All this has to be done on a Mac.