The Vatican did not name a telescope Lucifer. The Vatican Observatory shares space (no pun intended) with other organizations and groups. The Vatican Observatory does not own each piece of equipment nor can it give official names or nicknames to things it does not own. Another group installed a telescope it nicknamed Lucifer.
Its a telescope built by the Max Planck Institute for extraterrestrial physics and according to their website it stands for LBT Near Infrared Spectroscopic Utility with Camera and Integral Field Unit for Extragalactic** R**esearch. It is noted on the website that its official abbreviation has been changed to LUCI.
As the Vatican Observatory Official Website explains:
One of the stake holders in the MGIO is a group of European institutes who built an infrared camera and spectroscope, and named it "Lucifer". So what happened? First, somebody reported that an instrument called "Lucifer" was installed on Mt Graham. Then somebody remarked that Mt Graham also hosts the Vatican Advanced Technology Telescope, and that it is somewhat amusing that Mt Graham has both Vatican and Lucifer. Then the information somehow degraded and the slur was born: Vatican astronomers are supposedly friends with Lucifer...
It was not built or named by the Vatican Observatory.