Full output of /ess version:

> [22:38:58 INFO]: Server version: 1.8.8-R0.1-SNAPSHOT git-PaperSpigot-5e57ea3 (MC: 1.8.8)
> [22:38:58 INFO]: EssentialsX version: 2.17.2.3
> [22:38:58 INFO]: PlaceholderAPI version: 2.10.4
> [22:38:58 INFO]: LuckPerms version: 5.0.83
> [22:38:58 INFO]: Vault version: 1.7.2-b107
> [22:38:58 INFO]: Citizens version: 2.0.24-SNAPSHOT (build 1605)
> [22:38:58 INFO]: EssentialsXProtect version: 2.17.2.3
> [22:38:58 INFO]: EssentialsXSpawn version: 2.17.2.3

Server log: https://gist.github.com/Neeonn/2aeb4e7d2c87a7dc510fbe9ee472e827

EssentialsX config: https://gist.github.com/Neeonn/676d35f7e53b8f60f86642cf77f7ee8a

Details

Description
Formatting nicknames using & doesn't get converted, instead the nick gets shown as &bExample in the command output. This doesn't happen if the player is opped and/or has * perm.

Steps to reproduce
Remove every permission from yourself, give yourself all nickname based permissions, try to set a nickname. You should see that the output is as &bExample instead of Example (in aqua).

Expected behavior
Example (aqua) instead of &bExample when using /nick as a player.

Screenshots
Not necessary.

does the player have the essentials.nick.color permisison?

Yes.

This doesn't happen if the player is opped and/or has * perm.

Clearly this is not a bug then, but a problem with your permissions. Please visit the Discord support server and see the EssentialsX channel to ask for help from others on how to fix your setup.