Embedded SQL in C connection issue - c

Question

The Postgresql role is the owner of the db 'university' and it's been configured like,
alter user canoe password 'mypassword';
The piece of embedded SQL code in C just makes a connection to DB.
printf("SQLSTATE=[%s]\n", SQLSTATE);
EXEC SQL CONNECT TO 'university' USER 'canoe/mypassword'
printf("SQLSTATE=[%s]\n", SQLSTATE);
The code is compiled and linked. It's run on the localhost on which the postgresql server is running and listening on its default port.
$ ecpg connection.pgc
$ gcc -I/usr/include/postgresql connection.c -o conn -lecpg
The output of the compiled code is:
SQLSTATE=[00000]
SQLSTATE=[08001]
The error code 08001 means "sqlclient_unable_to_establish_sqlconnection". I've changed the configuration of postgresql to log all connection attempts in order to debug the code.
LOG: parameter "log_connections" changed to "on"
LOG: 00000: parameter "log_error_verbosity" changed to "verbose"
However, when the compiled code is run, there is no any error. When I connect it with pgsql, it has log info.
$ pqsql university -W
LOG: connection authorized: user=canoe database=university
The wired thing that I notice is even I enter wrong password after prompt, I can still get authorized. But my piece of C code doesn't work.
I can't resolve the issue or have any idea to debug it further. Any idea to where is the issue?