Rangers and Celtic are fierce rivals and will face each other in the Scottish Cup this season.
Johnstone, who played for Rangers in the 1970s and 1980s and is a club legend, believes that the Gers should raise their own players and then try to sell them instead of signing players on loan.
“The fact that results this term have been rather mixed with loan players shows that bringing younger lads from English clubs is not guaranteed to bring success,” the former Scotland international wrote in The Glasgow Evening Times.
“The general idea, surely, is that you raise your own player and have other clubs throwing money at you to buy them further down the line. That has worked well for Celtic and there is no reason why it should not work for Rangers either.”
Celtic are a big club in Scotland, but in recent years they have sold some of their best players to teams in England.
Players like Virgil van Dijk, Victor Wanyama and Fraser Forster have also left the Scottish Premiership giants in recent times.
Rangers could face the same situation if they get promoted to the Scottish Premiership and their players do well.
While signing players on loan is not a great plan in the long run, it does help a club in the short term.
For Rangers to be successful in the Scottish Premiership in the next two years, they need the right mix of loan players, youngsters coming through the academy and established stars.
Rangers and Celtic will take on each other in the semi-finals of the Scottish Cup this season.