NAIROBI, May 31 (Reuters) - Kenya's nominee to be governor of its central bank plans to push for local dollar bond issuance with the finance ministry once in office, he said, citing residents' domestic holdings of foreign currency.

President William Ruto named Kamau Thugge, an economic adviser and former senior Treasury official, as the next governor of the central bank two weeks ago.

Once cleared by parliament, which is controlled by Ruto's coalition, Thugge will replace Patrick Njoroge, who retires next month after two terms that have run since mid-2015.

Thugge told a parliamentary vetting panel that it was worth pursuing the issue of a local dollar-denominated bond, given foreign exchange deposits of about 1 trillion shillings ($7.33 billion) in the banking system.

"One of the things that I would like to explore with the national treasury is the possibility of actually issuing a dollar-denominated bond, the way we issue an infrastructure bond, and we structure it, and sell it locally," he said on Tuesday.

"If we can get those Kenyans who are holding dollars in their deposits to buy into it ... we will have a possibility of actually increasing liquidity of dollars in the system but also building up foreign exchange in the central bank."

The central bank's foreign exchange reserves of $6.49 billion cover 3.62 months of imports, which the bank says is sufficient to cushion any short-term shocks in the foreign exchange market.

Thugge said he would also continue the central bank's efforts to consolidate the banking sector, which Njoroge had also pursued.

"If I become governor ... that is one area I would like to continue to pursue, so that we have fewer banks, stronger banks with strong capital and liquidity buffers that can expand even regionally," he said.

The past few years have seen significant consolidation of Kenyan banks, since two mid-sized lenders were closed in 2015 because of liquidity problems.

The most recent major deal was the 2019 merger of Commercial Bank of Africa and NIC Group to form NCBA Group.

Challenges awaiting Thugge in office include a rapid weakening of the Kenyan shilling and a heavy government debt load that has crimped its finances.

($1=136.5000 Kenyan shillings)

Reporting by George Obulutsa; Editing by Clarence Fernandez

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