This question may be better suited to /r/etymology (etymology being the study of word origins). To get you started, the Online Etymology Dictionary has this entry:
sugar daddy (n.)
also sugar-daddy, "elderly man who lavishes gifts on a young woman" [OED], 1926, from sugar + daddy.
http://www.oed.com/view/Entry/193624?redirectedFrom=sugar+daddy#eid19881603
originated in 1922
the "daddy" in sugar daddy isn't "father" it is
Used in Jazz slang as a form of address. Also more generally applied to an older person, and (U.S. slang), a lover. Cf. dad n.1 2.
looking at the oed it seems the term daddy was frequently used in slang.
and in the 2nd half of the 19th century "sugar" was slang for money.
http://www.oed.com/view/Entry/193624?isAdvanced=false&result=1&rskey=cg7eTe&
so sugar and daddy could possibly literally be translated as "money" "lover"