SPM8 uses the general linear model. As such all covariates are treated as continuous/interval.
If you want to use a nominal/nominal variable, then you have three options:
(1) If it is 2 levels and only 2 levels, you can mean center the variable. The main effect will then be the mean effect of all subjects. The effect of the covariate will be the difference in your two levels.
(2) If you have 2 levels, you could make the covariate 0s and 1s. Then the main effect will be the effect in the group with the covariate value of 0 and the value of the covariate is the difference between the two groups.
(3) If you have more than 2 levels, then you will want to create dummy variables for each group and add 2 dummy variables to the model. One group is not included in the model and the main effect of group regressor is for the group that is not dummy coded.