By default, Nexus 4 does not provide the option to select a custom MP3 / sound file as the ringtone. You are limited to the set of built-in ringtones provided by Nexus.
But, here's a simple trick to set your own custom ringtone. Don't worry, you don't need to install any creepy app to do that (of course, there's an app for that, but we don't need it now). All you need is a laptop and a USB cable.
Here's how you set custom ringtone in Nexus (assuming you have Windows 7 here):
- Connect your Nexus 4 to your laptop and make sure it Connected as Media device (MTP).
- Now, in Windows Explorer (or any file browser in your OS), open the Nexus folder, and navigate to the Ringtones folder.
- Copy your custom ringtone files here.
Tada! Now you'll see the newly added ringtone listed in Nexus Settings -> Sound -> Ringtone panel.
Protip: You can use freely available [Audacity] (http://audacity.sourceforge.net/) to create your custom ringtones out of any MP3 / Sound files.