The nipple is obviously one meant to connect to an Injection pipe connection. Most likely to be used as a timing tool connected to the High Pressure outlet of (usually ) No 1. As said, as the engine is rotated, the pressure build up will light the light, to indicate the start of injection. A cleaner way than spill timing. an In Line, but could also be used on a rotary such as the Roosa Master, CAV DPA,, DPS, Bosch EPVA, EPVE, or any of the Stanadyne pumps.
It looks unused, but the size of the nut makes it look like it is meant for 'A' size connections, so probably not for anything bigger than a pump with a 10mm plunger size, so relatively low powered engines, (Not much more than 30-40 bhp / cylinder even if turbocharged. ).
Howard