Retired major general Mamman Shuwa, who played a key role in the conflict against Biafran separatists from 1967 to 1970, was shot dead outside his home in the Gwange area of Maiduguri on November 2, 2012.
The suspect -- 35-year old Mohammed Sani Nafi'u, alias Malam Yaro -- was arrested on Sunday in the Hotoro outskirts of the northern city of Kano, said Brigadier General Hamisu Hassan.
"Preliminary investigation has revealed that Mohammed Sani Nafi'u... Had aided the terrorists that killed late General Mamman Shuwa," Hassan told reporters at a military base in Kano on Monday.
The rebellion in the Borno state capital saw hundreds of Boko Haram members killed, including the group's founder, Mohammed Yusuf.
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Nafi'u is alleged to have fled Maiduguri after Shuwa's murder and was presumed killed in an encounter with troops until his arrest, said Hassan.
But Nafi'u denied any involvement, telling reporters in the local language, Hausa: "When General Shuwa was killed I was in the market conducting my business.
Nigeria's military in May 2013 claimed to have killed or arrested all but one of those allegedly involved in Shuwa's murder.