Star City needs the Green Arrow and Digg can’t be the Green Arrow in the long term; Oliver will need to return to the hood and bow.
Diggle as Green Arrow won’t work from a practical standpoint, and not just because he’s noticeably bigger than Oliver and has limited expertise with a bow and arrow.
Nobody else on Team Arrow is qualified or deserving of the Green Arrow mantle.
He was about to tell Oliver about the problem and presumably bench himself when Oliver broke the news that he wanted to pass Green Arrow onto Diggle.