This study examines the relationship between digital transformation capabilities and operational cost efficiency among small and medium-sized enterprises (SMEs) in North-Central Nigeria. Specifically, it investigates the cost-efficiency effects of process automation, data analytics capability, and employee digital literacy. Using a quantitative research design, data were obtained from 373 SME owners, managers, and senior employees and analysed using Structural Equation Modelling (SEM). The findings indicate that digital transformation capabilities significantly improve operational cost efficiency. Process automation and employee digital literacy demonstrate the strongest positive effects, suggesting their importance in reducing operational waste, labour intensity, and coordination costs. Data analytics capability also shows a positive but comparatively weaker effect, reflecting its complementary role in strategic monitoring and decision support. The study contributes to digital transformation discourse in emerging economies and offers practical insights for enhancing SME cost competitiveness.
Keywords: Cost Reduction, Digital Transformation, data analytics, process automation
