NAIROBI - Kenya's nominee for central bank governor plans to push for local dollar bond issuance once in office, he said, citing high foreign currency deposits in local commercial banks.

President William Ruto has nominated Kamau Thugge, an economic adviser and former senior Treasury official, to replace Patrick Njoroge, whose eight-year tenure ends in mid-June.

Thugge will explore the potential for issuing a local dollar-denominated bond, he told parliament's finance committee which is vetting his appointment.

Foreign exchange deposits in commercial banks stood at about 1 trillion shillings ($7.33 billion), he said, supporting the view that a local dollar bond is viable.

"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," he said on Tuesday.

Outgoing governor Njoroge urged caution with the local dollar bond issuance idea, saying the dollar deposits held by commercial banks were not idle.

"It wouldn't mop up excess dollars because there are no excess dollars in that sense... This would end up fanning the flames of dollarisation in the economy," Njoroge told a separate news conference on Wednesday.

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; Additional reporting by Duncan Miriri; Editing by Clarence Fernandez and Jan Harvey)