A bomb strapped to a girl aged around 10 years old exploded in a busy market place in the Nigerian city of Maiduguri on Saturday, killing at least 16 people and injuring more than 20, security sources said.

"The explosive devices were wrapped around her body and the girl looked no more than 10 years old," a police source said.

Maiduguri, the capital of northern Borno state, lies in the heartland of an insurgency by Islamist militant group Boko Haram, and is often hit by bomb attacks.

A Nigerian security source said the bomb went off at 12:15 pm. The girl was killed and the bodies of at least 16 victims were counted in one hospital by mid-afternoon, civilian joint task force member Zakariya Mohammed told Reuters.

"Right now, there are 27 injured people in Borno Medical Hospital, while more were taken to other hospitals," he said.

The northeastern states of Borno, Yobe and Adamawa are bearing the brunt of a five-year-old insurgency by Boko Haram, which wants to revive a mediaeval caliphate in Nigeria, Africa's most populous country and its biggest energy producer.

Last year more than 10,000 people died in the violence, according to an estimate by the Council on Foreign Relations.

About 130 km (80 miles) away in the Yobe state capital Damaturu, the army subdued an Islamist militant attack on Friday evening, but not before militants had torched several buildings, a Reuters reporter in the city and witnesses said.

The Reuters witness saw a number of burnt buildings, including a police station and a mosque in the Abacha market, along with several shops.

Defence spokesman Major General Chris Olukolade said that five soldiers were wounded defending the city and the number of civilian casualties was still being determined.

Damaturu was last attacked in early December when air strikes called in to halt advancing militants.

Olukolade said the military would regroup before mounting an effort to retake the town of Baga in Borno state raided twice by Boko Haram in the last week. The insurgents also took over a nearby military base on the edge of Lake Chad.

He said 14 soldiers had been killed in the first attack at last weekend. On Friday, the government said it had launched ground action backed by airstrikes to reclaim the area.

On Saturday afternoon, a bomb exploded at the main police station in the town of Potiskum in Yobe state after a man was arrested and brought to the station with his car, the state police commissioner said.

"We took the suspect to the station and the car...exploded and killed one of my men and a driver. The suspect did not die...he is still in our custody," Marcus Danladi told Reuters.

Residents who witnessed the scene said earlier two people had been arrested with the vehicle and blew themselves up once inside station.

The Boko Haram revolt is seen as the gravest security threat facing Nigeria, a country of 170 million people, and a serious challenge for President Goodluck Jonathan, who is seeking re-election in a national election set for February 14.