From the Merriam-Webster dictionary:

> Definition of NATION
> 
> (1) : nationality 
> (2) : a politically organized nationality 
> (3) : a non-Jewish nationality <why do the nations conspire — Psalms 2:1
> (Revised Standard Version)> b : a community of people composed of one
> or more nationalities and possessing a more or less defined territory
> and government c : a territorial division containing a body of people
> of one or more nationalities and usually characterized by relatively
> large size and independent status 
> 2 archaic : group, aggregation 3 : a tribe or federation of tribes (as of American Indians)  
>
> Examples of NATION
> 
> It's one of the richest nations in the world. 
> The largest state in the nation.
> The President will speak to the nation tonight.
> The entire nation is celebrating the victory.

This is what happens when you croudsource and no one cites the dictionary. As you can see, it refers to both.  All four of the examples are could be applied to the United States as a "Nation".  I never hear it used except in reference to a geographical area, a territory or a country.    

As for the example sentence, Nation should only be used to refer to large geographical areas or large groups of people, not something a small child with a limited political reach would be in control of.