The blast happened near a fish market in the Baga Road area of the city, which has been repeatedly targeted in recent weeks by shelling, bombs and suicide attacks.
"We heard a loud explosion at about 3:50 pm (local time) while we were preparing for afternoon prayers," said Danlami Ajaokuta, a civilian vigilante assisting the military against Boko Haram.
"It happened right inside the motor park (bus station) attached to the fish market where labourers were sorting out rice."
"People were occupied with sorting the rice. No one paid any attention. Suddenly, the casserole, which obviously contained explosives, went off. She was blown to pieces... We have sorted out 20 dead bodies and 50 others that were injured."
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Ajaokuta's account was supported by a labourer working at the scene who survived the blast, which sent people running in all directions in fear and panic.
"The rescue operation is still on, so the death toll may be higher at the end," said the labourer, who asked not to be identified.
There were also indications of a second bombing by a girl about the same age outside the bus station but no one was hurt.
There was no immediate claim of responsibility but Boko Haram extremists have frequently targeted civilians at markets and bus stations during their six-year insurgency.
The Islamist bombers have also used young women and girls as human bombs since the middle of last year, as part of a campaign of terror in the restive northeast and beyond.
Today's bombing takes the number of attacks in the city to five this month. Three have been by suicide bombers and one targeted a cattle market.