It runs off of a cantrip, making it an unbelievably cheap and reliable wondrous item, which fits.
(That said, I have to imagine Ye Olde Wizarde would be more likely to just make a self-lighting pipe, but that has a different sort of style to it.)
Pathfinder has a cantrip that does exactly what we're talking about here: Spark. If having that on demand is overpowered for your campaign, I'd drop the whole Magical Zippo idea entirely. But all we're really talking, effectively, is flint and steel with panache....What?
Oh, disregard that. I thought you said CatNIP at first, not canTRIP. Makes a whole lot more sense now. But I feel that makes the item a little op though. (edited)
Pathfinder has a cantrip that does exactly what we're talking about here: Spark. If having that on demand is overpowered for your campaign, I'd drop the whole Magical Zippo idea entirely. But all we're really talking, effectively, is flint and steel with panache.
Frankly, a non-magical one would be a much bigger headache, both for the character to use and the player to abuse. It will take your players about 30 seconds to identify it as a low-powered incendiary hand grenade, as opposed to the magical version, which won't have a fuel source attached.