Your younger brother in law sounds quite young.

First off, be above reproach: Don't do something innocent and regret it the minute it is done. I don't think you want to put yourself in a situation where you do show him, and he ends up telling people later "My brother in law showed me his penis". There is no way you can defend that and come out innocent.

The best thing to do is apologize and say "I'm sorry I did something to make you feel strange around me. You are my brother. Those are my private parts and they are private to me.", just as his private parts should be private to him as well.

Apologies can go a very long ways with kids. It is likely he is just nervous because of how your responded. Don't worry.