I'm not going to hire my friend
Why won't you hire a friend?
I want to hire someone else.
It's understandable to want to hire someone who is actually qualified for the job, but you should be direct and honest with your friend for your reasons for doing so. Otherwise they may become upset and hold the decision against you.
I'm going to hire someone else, I don't need to be honest.
You do need to be honest if you don't want this to ruin your friendship. The conversation will be hard, but it will be better for you both in the long run.