Wikipedia
Nicarao is the name of the capital city of the most populous indigenous tribe when the Spanish arrived in Nicaragua. Gil González Dávila, who first explored the area, came up with this Central American country's name by combining Nicarao and the Spanish word Agua, meaning water, after the two large lakes in the west of the country, Lake Managua and Lake Nicaragua.
Map of Nicaragua
Nicarao was the most important cacique or Indian chief at the arrival of the Spanish conquistadors in what today is Southeastern Nicaragua in 1522, although Columbus, on his 4th and last voyage, had already set foot in Nicaragua in 1502. According to some historians, the modern name Nicaragua is the Hispanized version of the phoneme Nicarao where the "o" has been dropped and the "gua" added to create the name of the country.