Contrary to common believe, iCloud Private Relay and NextDNS are compatible and can both be enabled at the same time, see page 10 of apple.com/…/iCloud_Private_Relay_Overview_Dec2021…. When you try to visit a blocked hostname in Safari, you’ll see that it won’t work. This is something that I’ve personally confirmed.
What NextDNS solves and iCloud Private Relay doesn’t, is blocking hostnames system wide, thereby completely blocking some ads and tracking. What iCloud Private Relay solves is hiding your browsing traffic a bit better within your local network and from your ISP, as well as hiding your IP from trackers and hiding your identity from their DNS resolver (not from NextDNS, though).
If I had to choose, I’d go with NextDNS for system wide blocking and I’d add an adblocker browser extension to block trackers and ads that can’t be blocked with DNS based blocking. But you don’t have to choose and can use both at the same time.