Police say a further 18 were injured in the explosion at a market in Maiduguri which happened at around 12:40 on Saturday afternoon.
No group has claimed responsibility but Islamist Boko Haram militants are being blamed.
Maiduguri is a majority Muslim city but has a high Christian population although the faith of the dead is not known.
Boko Haram is attempting to establish an Islamic caliphate in parts of north east Nigeria and has waged a war against non-Muslims for the past five years.
WHAT IS BOKO HARAM?
• Created in 2002, declared terrorist group in 2013
• Name means 'Western education is forbidden'
• Attempting to create Islamic State
• Thousands killed, millions affected.
Meanwhile an attack on a town last week is being described by Amnesty International as Boko Haram's "deadliest act" yet.
Militants attacked Baga and surrounding towns on Saturday 3 January killing up to 2,000 people.
Daniel Eyre, Nigeria researcher for Amnesty International, said: "The attack on Baga and surrounding towns, looks as if it could be Boko Haram's deadliest act in a catalogue of increasingly heinous attacks carried out by the group.
"If reports that the town was largely razed to the ground and that hundreds or even as many as two thousand civilians were killed are true, this marks a disturbing and bloody escalation of Boko Haram's ongoing onslaught against the civilian population.
"We are currently working to find out more details of what happened during the attack on Baga and the surrounding area.
"This attack reiterates the urgent need for Boko Haram to stop the senseless killing of civilians and for the Nigerian government to take measures to protect a population who live in constant fear of such attacks."