Police have not provided a death toll, but an emergency official said on condition of anonymity that 34 bodies were brought to a local hospital and some 22 other people were being treated for injuries.
He added that the toll was likely to be more than 50 because families were also burying relatives’ bodies without bringing them to the hospital.
Residents described a terrifying scene at the market usually crowded with traders, with scores of cattle burnt, the market razed and dozens of people killed.
One resident said firefighters were at the scene on Thursday morning searching water wells out of fears that residents had fallen in and drowned while trying to flee.
Residents crowded a local hospital to determine if their relatives were among the dead.
Islamist group Boko Haram has carried out scores of attacks in northeastern Nigeria, including in Potiskum, but criminal groups have also committed violence under the guise of the group.
Gangs often seek to provoke panic at markets, forcing traders to flee so they can steal their wares.
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