We put forth a simple model that allows us to obtain the nonlinear coefficient of a waveguide doped with dimers of Ag and Au, and study its unique nonlinear optical properties through the recently introduced photon-conserving nonlinear Schrödinger equation. We calculate the doped-waveguide effective third-order susceptibility based on the Maxwell Garnett model and its extension to nonlinear optics. In particular, our model captures the nature of the plasmon hybridization in an equivalent single nanoparticle whose dielectric function and size are derived. As a result, we obtain a gap-dependent nonlinear coefficient significantly higher than that of waveguides doped with single nanoparticles. Finally, a modulation-instability analysis reveals a complex nonlinear response from the waveguide depending upon the dimer gap, including the emergence of ultra-narrow gain bands. We believe these findings to be of singular relevance in the engineering of photonic devices based on nanoparticle-doped waveguides.