"Nigger" is offensive slang for a black person. There are other words that are not offensive that can be used in it's place, ie black or African. I would never use it outside of discussion of the word itself regardless of whether there were any black people around.
It's commonplace for members of a certain group to use epithets within their group in a playful manner, but for outsiders to do the same is considered offensive. Black boys calling each other "Nigga" isn't offensive, while it would be for any other group. I don't understand it either, but then again, I'm not black, so I have no frame of reference.
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