Nationalism isn't standalone, it's tied to a particular nation.

Changing loyalty to a larger nation isn't the same as becoming less nationalistic.

The Schengen Area is not in any sense a nation. Look at the definition of the word nation: "a large aggregate of people united by common descent, history, culture, or language, inhabiting a particular country or territory". The Schengen Area checks off people and territory but nothing else.

It doesn't even have a shared government to try to make it fit if you are trying to use "nation" as a synonym for "country". Most of the countries are part of the EU, but Iceland, Liechtenstein, Norway, and Switzerland are part of the Schengen Area but not the EU.

> united by common descent, history, culture, or language

Are you saying Europeans don't have any descent, history, or culture in common?

Descent, mostly not. Culture, mostly not. History, yes, of constantly fighting each other for hundreds of years (which is the type of shared history that creates national separations, not the kind that unites nations).

There are some groups of countries that have some descent and culture in common like Portugal/Spain or Benelux or Scandinavia, but there is no pan-European culture. Portugal, Greece, Monaco, Latvia and Iceland have almost nothing in common.

Then why hasn't the Schengen area admitted north Africa or the middle east?

Spain is a lot closer to Morocco than to Norway, but Spain partnered with Norway rather than Morocco because they share the same descent (European) and culture (Christian).