I am using LG Nexus 4 from past one year and now I am fed up its cameras performance so I was wondering whether I can replace it with a better camera by the likes of LG nexus 5 or anyother phone
I don't think its possible(can't say for sure though),if you attempt to install a different camera then you may run into a lot of software and hardware related compatibility issues.
Yes you can. Get sony external sensor and add it up with your N4 camera and wham you are up with a new sensor.