O'Neill has placed a lot of trust in the 21-year-old since taking over as national boss at the start of last year, making him first choice on the left of midfield despite his relative inexperience.
But, after a positive start to the Premier League season that saw him increasingly involved in first-team affairs at St James' Park, Ferguson found himself nudged to the periphery by the influx of signings from France in January.
Ferguson played no senior club football in January or February and eventually agreed a loan deal with Birmingham.
He has earned rave reviews in his four games to date and provided the assist as Blues beat Middlesbrough 1-0 on Saturday.
O'Neill, himself a former Newcastle player, is delighted to see the player back showcasing his skills ahead of home clashes against Russia on Friday and Israel four days later.
"It was important to get Shane out on loan and I was pleased he got that opportunity," said O'Neill.
"The introduction of the new players at Newcastle made things very difficult and sort of halted the progress he was making there. He had been getting game time and making an impact, whether he was starting games or coming off the bench.
"But I think with Newcastle they were in a slightly more precarious position in January than they are now and it was hard to introduce a young player in that environment.
"The opportunity to go Birmingham and play for Lee Clark, who knows him very well from Newcastle, was good for him.
"People expect a lot of him because his performances at international level have always been good in the short time I've had him.
"At times he hasn't been playing as much as you would like to give him the best chance of performing for us and going to Birmingham will help that."
Despite having his own interest in such matters, O'Neill is careful not to interfere with his players' club situations.
He does, though, take a keen interest in them and believes Ferguson is being handled well by Newcastle.
"A lad's club career is their club career, but Shane did indicate to me that there was a chance they would let him go on loan and I said I would help him in any way I could," he said.
"But he is a Newcastle player and I think Alan Pardew manages him very well. They know they have a real asset in Shane and it's in their interest for him to be out playing as well.
"I'm sure when he goes back at the end of the season he will be a much better player for it."
O'Neill's initial squad for the matches has had one change prior to the players' arrival in Belfast, with Derby forward Jamie Ward withdrawn pulling out injured on Sunday night and Aberdeen's Josh Magennis replacing him.