There could be a hole which would allow weather (rain and snow) to come in and then drip onto your ceilings. The squirrel will fill up the area with sticks and stuff which could block proper air flow/venting of the attic which could cause moisture problems and ice dams, etc. in the area of his nest. Some squirrels will drop stuff down your plumbing vents which then causes drainage problems. By the way, what's his name? or is it a her? or is it a momma squirrel with little ones coming to run around your attic?