You may not realize this, but that cage is too small for a cockatiel. If possible, you should significantly increase the size. The links provided by Wendy will give you a very good idea of what might be more appropriate for a bird the size of a cockatiel.
As for his eye, I suspect night frights. They are common in many cockatiels. He probably got startled during the night and crashed headlong into every wall of the cage before finally calming down. If one of those toys had an edge or protuberance of any kind, I'd imagine it might do that kind of damage.
Oh, and that medication. Is it for human use? Because the concentration might be too high for a parrot. You really should try and find an avian vet to see him. They could tell you what medications would be needed and in what exact dosages. The wrong medication or too much of the right one could further damage your bird's eye.