okay this is basically the scenario/backstory in my AU on how Nick ended up with his fear of water (and the ocean) ;;
this is based of the opening cutscene in Sonic Spinball, where Sonic was knocked off of Tails' plane and fell in the ocean on his way to Eggman's Veg-O-Fortress. this scene highkey scared me as a kid and it made so much of a impression on me that i placed it in my AU (i wanted to scream making this since this subject matter is terrifying, you're welcome).
as said in the manual he gets saved at the last minute, but in this case he doesn't know (or doesn't remember) since he went unconscious and woke up near Toxic Cave with supposedly no one around.
i think the fact that the water was dark due to it being nighttime and that he really thought he was gonna drown is what really traumatized him and made him suppress the memory. after all, Nick was just a kid, even younger, at this time... and because of having to be strong for others and needing to keep the world safe, which is already a heavy responsibility for someone his age, he couldn't properly deal with his trauma. Tails is pretty much only one who knows how he really feels (and about this event).
this won't be the last time this happens to him unfortunately...