"The target was a pick-up truck transporting a senior local official," police spokesman Mohamed Moalim Abdirahman said of the blast.
Medical worker Mohamed Adan said the hospital had received six dead bodies, and that "three others died from their wounds in the hospital". Another dead body was collected by relatives direct for burial.
The town, which is under the control of government troops backed by African Union forces, was wrested off the Al-Qaeda-linked Shebab rebels two years ago.
Police sources said the blast had been a car bomb parked outside a busy bank.
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The Shebab have been driven out of fixed positions in Somalia's major towns by the UN-mandated AU force, but still regularly launch attacks that include bombings and guerrilla-style raids.
Recent Shebab attacks have targeted key areas of government or the security forces, in an apparent bid to discredit claims by the authorities that they are winning the war against the Islamist fighters.
A UN appeal for USD 933 million in humanitarian aid for Somalia is so far only 15 percent-funded.
Some 250,000 people, around half of them young children, died in Somalia during the 2011 famine, according to the UN, which has acknowledged it should have done more to prevent the tragedy.