From Wiki:
The Philologist Johann Christoph Adelung states about the Germanic origin of the word that, in the vernacular, Pumpen was a New High German synonym for being flatulent, a word similar in meaning to the English “fart”, and “Nickel” was a form of the name Nicholas, an appellation commonly associated with a goblin or devil (eg “Old Nick”, a familiar name for Satan), or more generally for a malevolent spirit or demon. (See also the metal nickel, probably named for a demon that would “change” or contaminate valuable copper with this strange metal that was much harder to work.) Hence, pumpernickel is described as the “devil’s fart,” a definition accepted by the Stopes International Language Database, the publisher Random House, and by some English language dictionaries, including the Merriam-Webster Dictionary.] The American Heritage Dictionary adds “so named from being hard to digest.” A variant of this explanation is also given by the German etymological dictionary “Kluge” that says that the word pumpernickel is older than its usage for the particular type of bread and may have been used as a mocking name for a person of unrefined manners (“farting nick”) first. The change of meaning may have been caused by its use as a mocking expression for the (in the eyes of outsiders) unrefined rye bread produced by the Westphalian population.
The Oxford English Dictionary, however, does not commit to any particular etymology for the word. It suggests it may mean a lout or booby, but also says, “origin uncertain.” The OED currently states the first use in English is from 1756. However, there is an earlier use. An eight page drinking song titled “Beef and Butt Beer, against Mum and Pumpernickel” was published in London in 1753.
There is also an oft-quoted story of how Napoleon was brought dark German rye bread for dinner while invading Germany. He declared that he wouldn’t eat it and said instead “c’est pain pour Nicole!” In other words, it wasn’t for him but for his horse Nicole. “Pain pour Nicole” over time became Pumpernickel. The Straight Dope describes this Napoleon story an example of folk etymology: because the word “pumpernickel” was in use before Napoleon’s time, this could not have been the word’s origin