Pinterest has some really neat ideas https://www.pinterest.com/donnashonk/niche-decor/

How about removable wallpaper? https://www.target.com/s?searchTerm=removable+wallpaper+modern+farmhouse&Nao=168

Before painting, sheetrock over niche. It is dated and not functional. Then paint. Remove carpet from stairs and paint black and white and do an interesting carpet runner. Stairs without carpet are noisy and slip probe. Your new flooring will be fabulous! I would select large black and gold piece for entry. I would paint and not do any wood elements on walls. Concentrate on stairs, carpeting for stairs,entry fixture. Be careful about adding more wood elements.

Here is rough mock up.

I'm not sure if its your style but I think a mirror that looks like a window with a flower box at the bottom and some pretty flowers/vines hanging would be awesome. Especially if your going with black/white color scheme. You can even salvage some shutters if you look around for yard sales/thrifts, etc. Also, a spotlight to highlight whatever you do decide to go with would be nice. Hope this helps!

I vote for Flo’s suggestion. While you have the workers there, close it up and paint over it. Your b&w theme will be more dramatic with that wall closed up.

Nothing is farmhouse about that niche. Fill it in now and move on. To me you have a nice staircase, I would rather see the handrail stripped and stained to match the floor rather then painted. Costs a little more but looks more expensive.

Cover that bad boy up. Boost up the space by adding moulding to that wall. Floor to ceiling.

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I also feel that your lighting choice is too small and will fade into nothing once up. I would get something that is bolder and if your banister is going to be finished dark then the lighting should go dark too. You have approx a 19-22' ceiling there so think substantial for lighting. Before the moulding goes up consider hardwiring for sconces on the stairway.

get rid of the niche.

Flo's ideas are great!! Definitely get rid of the niche!!!

following for updates when done... say goodbye to the niche.