The Football Association of Zambia (Faz) had been looking to employ an expatriate coach and even conducted interviews for the position.
Former South Africa coach Gordon Igesund was tipped for the job after impressing in interviews.
But Lungu said: "Forget about an expatriate coach. We can do with an indigenous [coach]."
Lungu also offered his support to interim Chipolopolo coach Wedson Nyirenda, who was appointed as a replacement for George Lwandamina last month, saying "he is doing well".
That assessment came after Zambia's 2-1 defeat by Nigeria in their opening 2018 World Cup qualifier on Sunday.
Lungu remains optimistic about Zambia's chances of booking their place at the tournament in Russia.
"We can make it. Others have made it before us. Now it is our time and I 'm sure we will make it," he added.
"Our eyes should be on the ball, we are a winning side and we should strive to win until we get to Russia."
Zambia president Edgar Lungu has told the football association to employ a local coach for the national team.