Ralph sees that the boys are missing the point about the fire. They are only young, some of them quite small, and the younger ones especially do not have the maturity of thinking to predict and to plan in abstract way for the future. All they know is 'now' - like in 'fun, now.' Children are excited by fire, but it is the flames that are dramatic, not the smoke. Immature minds also tend to think that with most things, the bigger the better. Not so for Ralph - he is thinking more like cowboys and indians where the braves 'make talk' by wafting the smoke with mats or branches as signals. he is right to think that putting something more cool and damp will subdue the fire and produce more smoke to get them seen from a distance.
I think you must be talking about the part in Chapter 2 where the boys have their first try at making a fire. The reason that the fire is no good is that it did not make any smoke.
The whole point of having a fire was to signal a passing ship to come and rescue the boys. So if they are going to be able to signal a ship (or make a ship notice them) they need to have the fire make a bunch of smoke. But this first fire was made with wood that was too dry and so it didn't produce much smoke.
In the book The Lord of the Flies Ralph has a main concern and that is for shelter and to enable them to be rescued. Ralph had organized the boys into building and maintaining the fire, but the fire roars. The harsh flames are bright but do not produce smoke that would fill the sky and allow for the boy's rescue.
Ralph comes up with the idea of burning palm fronds to make smoke instead of the wood that creates the flames. He is smart enough to realize that no matter how big the flames, they will not enable the boys to be rescued.
The fire is no good because it did not make any smoke. They were trying to signal a ship to rescue them, but could not because the fire made no smoke.