The U.S. phrase to squeeze a nickel until the Indian is riding the buffalo, and its variants, mean to be extremely tight with money.

This phrase refers to the five-cent coin known as Buffalo nickel, or Indian Head nickel, that was struck by the United-States Mint from 1913 to 1938; designed by the U.S. sculptor James Earle Fraser (1876-1953), this coin featured a Native American on one side and a bison on the other.

Buffalo nickel—image: National Numismatic Collection, National Museum of American History:

 

However, the earliest occurrence of the phrase that I have found does not refer to niggardliness, but to impecuniousness. It is from The Sale of Two Cities: “Team! Team!”, a short story by Madeline Woods, published in the Alton Evening Telegraph (Alton, Illinois) of Monday 27^th April 1925:

He [= Pete] took the next train for Chicago and when he was down to the last nickel, and it was worn so thin the Indian looked like he war [sic] riding the buffalo, Pete got a job in a factory.

The earliest occurrence that I have found of the phrase used to denote niggardliness is from The Budget ¹ (Lawrence, Kansas) of Friday 26^th February 1926:

Stinginess

The Man who stretches the dollar bill till the eagle looks like a pelican.
The Man who fries his bacon in lux ² to keep it from shrinking.
The Man who squeezes a buffalo nickel till it looks as if the Indian was riding the buffalo.
The Man who jumps over the gate to save the hinges.

¹ The Budget was the journal of the students of Liberty Memorial High School, Lawrence, Kansas.
² This probably refers to Lux (with upper case L), which was the trademark name for a cleansing agent/detergent sold cheaply in packets.—With thanks to Gerald Cohen, professor of foreign languages at Missouri University of Science and Technology, Rolla, Missouri.

The second-earliest occurrence of the phrase that I have found is from the column Cheerful Chirps, by ‘Del’, published in The Coconino Sun (Flagstaff, Arizona) of Friday 19^th March 1926:

Bill Hicklin says he knows a man who’s so darned stingy that a nickel in his pocket wears so thin it looks for all the world like the Indian is riding the buffalo.

The very same formulation occurs in the column Wise and Otherwise: A Combination of Fun, Facts and Foolosophy, by ‘J. K. G’, published in The Bremen Enquirer (Bremen, Indiana) of Thursday 1^st April 1926:

RUDY STOLLER says he knows a man who’s so darned stingy that a nickel in his pocket wears so thin it looks for all the world like the Indian is riding the buffalo.

The phrase then occurs in the column Cullings, published in the Women’s Page of The Lake County Times (Hammond, Indiana) of Monday 1^st April 1929—the following refers to the stereotype of Scots being miserly (cf. ‘bang went sixpence’: origin and early occurrences):

By way of more Scotch humor:
Have you heard of the Scotchman who wanted to build a house and sent to the nearest Masonic Temple for some Free Masons?
[…]
The worst one, though, is the man who squeezed a nickel so tight that the next person receiving it, found the Indian riding the buffalo.

In a letter to the Editor, published in the Pottstown Mercury (Pottstown, Pennsylvania) of Wednesday 2^nd February 1949, one Henry L. used both to squeeze every nickel until the Indian is riding the buffalo and a synonymous phrase:

Why do we have to squeeze every nickel until the Indian is riding the buffalo or Jefferson is sitting in Monticello ³?

³ The two-dollar bill issued from 1928 to 1966 featured Thomas Jefferson’s portrait on one side and Jefferson’s home, Monticello, on the other. (Thomas Jefferson (1743-1826) was the 3^rd President of the USA from 1801 to 1809.)