Does /Ĩ/ *really* exist in Southwestern Mandarin?
Yes they use /l/.
People from the Southwest sometimes can not distinguish /n/ and /l/ very well.
For example,  牛奶 [milk], in standard mandarin it should be [niu2 nai3]; however, people from the southwest usually say [liu12 lai4]; even if when they are trying to speak mandarin, they prounance like [liu2 lai3].