Even before the development of the Panama Canal, there were discussions by the U.S. government and Nicaragua to build a canal through Nicaragua that connected the Pacific Ocean with the Caribbean Sea. At the time there was no way for a sizable ship to travel from the Pacific Ocean to the Atlantic Ocean, or vice-versa, without sailing around the southern tip of South America. Thus Panama and Nicaragua were largely competing for the money from the U.S. government to build the transoceanic canal. Nicaragua had one advantage, which was that it contained the lowest elevation point across Central America and thus would make for an easier project. However, it was Panama that won the U.S. congressional approval and the U.S. purchased the failed canal project from a French company and built the Panama Canal as it is known today.
As the Panama Canal has aged, it has been unable to accomodate larger and larger cruise ships, modern container ships, and mega-tankers. And thus there have been new proposals for a Nicaragua Canal project because the Panama Canal hasn't been able to handle the larger and larger ships that have been created. However, in 2006 the Panama government seeing this threat, approved a multi-billion dollar 10 year project to expand the Panama Canal to accomodate these newer and larger ships.
Most of the Nicaragua Canal proposals have entailed following a river, such as the San Juan River, from the Caribbean Sea to Lake Nicaragua and then building a canal from Lake Nicaragua to the Pacific Ocean.
Although there have been various plans in the past, there are currently no serious plans (with funding) to develop a Nicaraguan Canal to compete with the Panama Canal.