Local residents and witnesses said on Saturday that the militants from Boko Haram Takfiri terrorist group struck Gudumbali in the Guzamala region of Borno state at around 4 p.m. on Friday.
Heavily-armed militants wearing military uniforms fired upon Nigerian soldiers and residents across the troubled region, Presstv Reported.
They noted that the troops and thousands of residents had fled.
"Many civilians lost their lives, we don't have casualty figures for now," said Mohammed, one of the residents, who identified himself with first name.
The vigilante, Baba Ali Musa, said the militants came on motorbikes and in pick-up trucks mounted with anti-aircraft guns, while others fired rocket-propelled grenades on the town.
"They came towards the town shooting sporadically," he said.
"They were saying if you know you're an innocent person just leave the town, our target is not you, or if you wish to stay with us, it's no matter, you can stay with us."
"They came towards the town shooting sporadically," he said. "They were saying if you know you're an innocent person just leave the town, our target is not you, or if you wish to stay with us, it's no matter, you can stay with us."
The Nigerian government in June ordered thousands of people who fled the decade-long war with Boko Haram to return to Gudumbali, one of the most dangerous areas of the country's troubled northeast .
Officials cut off food and other aid to those who refused. There is mounting pressure to show progress in the war against militant groups ahead of a presidential election.
Nigerian President Muhammadu Buhari, a former general, came to power in 2015 on a platform of stamping out the Boko Haram militancy. But despite retaking swathes of territory from the group, it continues to stage attacks targeting both civilians and military targets.
Since 2009, the Boko Haram militancy has left at least 20,000 dead and made over 2.6 million others homeless.
The United Nations warned late last year that areas affected by Boko Haram militancy face humanitarian crisis.
Adamawa, Borno and Yobe states in northeast Nigeria are the three states most affected by the Boko Haram militancy.