He said his three young grandchildren were also in a Pakistani jail with their mother, Irfana Ali.
Speaking for the first time about the case, Mr Niwaz, a taxi driver from Grindleton Street, pleaded with the British authorities to bring them home.
Mrs Ali, 27, is accused along with her husband, Malik Mohammed Ali, of killing Mr Ali’s 10-year-old half brother in a dispute over their father’s inheritance.
The housewife and former student at the Noorul Islam mosque, in Audley Range, is five months pregnant with her fourth child, her father told the Lancashire Telegraph.
Mr Niwaz, 56, said: “They had gone to Pakistan on holiday and they were due to come back on Monday. It’s terrible.
“She is not well. She is a young woman and she is frightened.”
Police in the Jhelum area of Pakistan were reported to have told a press conference that the couple had confessed to killing 10-year-old Daniyal around two weeks ago.
The child was said to have been kidnapped from a mosque, hanged and had his head smashed by a stone.
Mr Niwaz, who has two other children, said his daughter had been threatened by police, and could not have been involved as she was looking after her three daughters, aged five, three and two at the time.
Mrs Ali was born in Denmark, and lived at Grindleton Street for more than 20 years, before moving to Milton Keynes after getting married.
The couple, British nationals, are being helped by British Embassy officials.
But Mr Niwaz said little progress was being made and now plans to involve Blackburn MP and former Foreign Secretary Jack Straw.