The move has been to the benefit of all parties with 26-year-old Nicholls gaining important match fitness after a serious injury and his presence helping Exeter's form pick up sharply after a poor start to the season.
Cobblers boss Chris Wilder told BBC Radio Northampton: "He's been away and done great. It's no coincidence that they've got results as well."
Nicholls will be involved in the squad that travels to Portsmouth on Tuesday night for a Johnstone's Paint Trophy tie.
Pompey drew a blank in a goalless draw at York City on Saturday but manager Andy Awford said afterwards: "Someone is going to get a tonking one of these days, they really are. The amount of chances we're creating in games makes it frustrating that we can't take one or two of them."