Seventeen-year-old Nwaneri is enjoying regular first-team exposure two years after becoming the youngest-ever player in the Premier League, and he scored his first goal in the competition in the weekend's 3-0 victory over Nottingham Forest.
Nwaneri is yet to start a game in England's top flight, though, much to the chagrin of many Gooners, and Arteta stressed the importance of building up the teenager's development "brick by brick" after Saturday's game.
Speaking to Sports Mole, Watts conceded that there will never be a unanimous verdict on Arteta's handling of Nwaneri, but as the 2007-born midfielder is still growing, he can understand the Spaniard's reluctance to throw him in from the start.
"There's not much more you can really say about him," Watts said. "It's just the ease in which he enters games; the goal was great, but the bit he did before that - the first touch, he got the ball and the little step over he did, beat his man, curled his shot just wide and immediately the stadium's up again. And he just has that impact on the ground when he enters the pitch, the stadium, you sense it, you really do.
Watts: 'You know Nwaneri will do something special'
"You just sense the atmosphere go up a notch or two and the excitement levels go up a notch or two because you know he's going to do something very, very special. He's on the pitch 10 minutes. He's got himself a goal, almost got another, which would have been an even better goal. And he's just got it. He just absolutely has it. It was interesting watching, listening to Arteta in the press conference afterwards, and the one thing we can all agree on is that we're never going to agree. Not everyone is going to agree on how Arteta is handling Ethan's development. And I think it's very easy for you, for me, for fans to sit there and kind of criticise, and I've done it.
"But ultimately Arteta's the one who has a responsibility for this kid's career in his hands. And he's the guy who has to manage him in the way he sees fit to get the best out of him. So as much as we can argue about how he's being handled and whether he should be having more minutes than he's had so far responsibility lies on Arteta.
"That is a big responsibility as well, because you've clearly got a very talented young player here who you've got to try and get the best out of. And I think with Ethan, the important thing to remember is he is still growing. He's not an adult yet. There's growing pains going on. His body's changing still. And that all has to be taken into account."
Nwaneri is the latest in a long line of Hale End talents to burst onto the Arsenal scene, a list that also includes Bukayo Saka, Emile Smith Rowe and Wilshere, who was previously considered one of England's best prospects during his teenage years.
The former midfielder never reached his full potential, though, having been bedevilled by numerous serious injuries - mostly ankle-related - and missing a staggering 257 matches for club and country during his time in North London.
Wilshere retired at the age of 30 in 2022, after which he returned to Arsenal as their Under-18s manager before recently leaving to take on an assistant coach role at Norwich City, and Watts has affirmed that Arteta cannot allow another Wilshere-type situation to happen with Nwaneri.
Watts warns Arsenal against repeating Wilshere, Barcelona mistakes
The Gunners expert also highlighted Barcelona's record with youngsters such as Gavi, Pedri and Ansu Fati, all of whom have been struck down by severe injuries after being exposed to regular game time as a teenager.
"Ethan is still maturing and he's still developing as a player," Watts added. "I know lots of people point at [Lamine] Yamal and say, look, if Barca are doing it with him, why can't Arsenal be doing it with Ethan? But then you also look at some of the other youngsters Barca have done it with recently, like Gavi, and their bodies are breaking down and they've been out for an awful long time because maybe they just weren't ready for that amount of minutes at such a young age when they're still developing.
"And we've seen it with Jack Wilshere before. Ethan's the most exciting player I've seen come through at Arsenal since Jack, absolutely. And Jack at the same age just blew you away when you watched him. It's like, 'my God, this kid is unbelievable.' But his body couldn't cope with the amount of minutes he played so young.
"I'm sure Arsene Wenger might argue that a little bit and say it was more impact injuries on the ankle that caused it. But was it all those minutes so young that cost him his career basically? And you don't want that to happen to Ethan.
"Ultimately it's down to Arteta and he's doing it the way he sees right. And it's tough to argue with him because he does know more than we do. The sports science people, the fitness coaches, they all know more than we do. And if they believe this is the right path for Nwaneri and the minutes he's getting, the load that he's getting right now are the correct one, then it's tough to argue. Even as a fan, if you do just want to see more of this kid, because he's clearly, clearly such a special talent."
After capping off the Gunners' "best performance of the season" in the win over Forest, Nwaneri enjoyed another bright cameo off the bench in Tuesday's 5-1 Champions League thrashing of Sporting Lisbon.