Answer:
It is a nickname for Nationalsozialistische Deutsche Arbeiterpartei (National Socialist German Workers' Party). The nickname is based on the first two syllables, as pronounced in German and was already current in 1923 in Bavaria.
In English the word can be either a noun or an adjective. In German it is only used as a noun. In English the word ceased long ago to be a nickname and it used by scholars. of
(In some South Bavarian dialects, Nazi was also a nickname for Ignaz, rather like Nacho for Ignacio - and also a word for a buffoon or clown).
The National Socialist German Workers Party (NSDAP) was originally a very small hardline nationalist party.