|Libyan fighters are holding talks with tribal leaders in Bani Walid to enter the town peacefully [Reuters]
A large convoy containing between 200 and 250 Libyan armoured vehicles has crossed into Niger.
Military sources from France and Niger told the Reuters news agency that the convoy, escorted by the Niger army, arrived in the northern desert town of Agadez on Monday.
Amid the reports about the convoy, Libyan opposition fighters have been holding talks with tribal leaders in Bani Walid to enter the town peacefully.
They are also negotiating with some tribes in Sirte, Gaddafi's hometown, to lay down arms.
Monday's convoy included officers from Libya's southern army battalions and pro-Gaddafi Tuareg fighters, and likely crossed from Libya into Algeria before entering Niger, the sources said.
The French military source said he had been told Muammar Gaddafi and his son Saif al-Islam might be considering joining the convoy en route to Burkina Faso, a landlocked West African state which has offered Gaddafi and his family asylum and has a border with Niger.
Niger's harbouring of wanted Gaddafi-regime officials is "a breach of the United Nations travel [restrictions] for most of these people", Aly Abuzaakouk, executive director of Libya Human and Political Development Forum, told Al Jazeera.
He said Niger should "not side with the enemy of the Libyan people".
The French military source said he had been told the commander of Libya's southern forces, General Ali Khana, may also be in Niger, not far from the Libyan border.
He said he had been told that Gaddafi and his son Saif would join Khana and catch up with the convoy should they choose to accept Burkina Faso's offer of exile.
On Sunday, the head of Gaddafi's security brigades, Mansour Dhao, along with more than 10 other Libyans, crossed into Niger, two Niger officials said earlier on Monday.
Dhao's departure comes days after Gaddafi's wife and three of his children fled to Algeria and fighters for the National Transitional Council [NTC] arrested his foreign minister outside Tripoli.
Burkina Faso offer
Burkina Faso, a former recipient of large amounts of Libyan aid, offered Gaddafi exile about two weeks ago but has also recognised the NTC as Libya's government.
Yipene Djibril Bassolet, the country's foreign minister, said that Gaddafi could go into exile in his country even though it is a signatory of the International Criminal Court, which has charged him with crimes against humanity.
Mansour El Kikhia tells Al Jazeera about the implications if Gaddafi was in the convoy
Mansour El Kikhia, chair of the political science department at the University of Texas, told Al Jazeera: "What is bothersome to me more than anything else is that Gaddafi is aided by some of Tuareg supporters."
"Gaddafi is going to cause mischief, and it is now imperative that the council [NTC] prepares for these contingencies."
Gaddafi has said he is ready to fight to the death on Libyan soil, although there have been a number of reports that he might seek refuge in an African nation.
As for the toppled leader, he is reportedly still in Libya. His spokesman Moussa Ibrahim said that Gaddafi "is in a place that will not be reached by those fractious groups, and he is in Libya."
Gaddafi is in good health and in good spirits, Ibrahim said in remarks broadcast on Monday. He said Gaddafi's son, Saif al-Islam, was also in Libya, moving around from one place to another.
Thousands of NTC fighters have been camping outside Bani Walid, about 150km southeast of the Libyan capital, Tripoli.
Abdallah Kanshil, who has been conducting talks for the interim government, said on Monday a peaceful handover of Bani Walid was imminent.
Kanshil said: "The surrender of the city is imminent. It is a matter of avoiding civilian casualties. Some snipers have surrendered their weapons ... Our forces are ready."
About 20km outside Bani Walid, NTC forces have also built a field hospital and installed 10 volunteer doctors to prepare for the possibility, in case Gaddafi loyalists did not budge.
Reporting from near Bani Walid earlier on Monday, Al Jazeera's Sue Turton said: "Fighters pushed to within seven kilometres of the centre of the town and exchanged fire with some of Gaddafi's forces.
"But they have since retreated a little bit instead of setting up a defensive position there."
UK to examine spy ties
Against the backdrop of the continuing conflict, David Cameron, the British prime minister, said an inquiry into his country's pursuit of terrorism suspects will examine new allegations about cosy ties between UK intelligence officials and the Gaddafi regime.
Security documents discovered after the fall of Tripoli have offered embarrassing examples of the warm relationships that British and American spies had developed with their Libyan counterparts.
Cameron said his country's special representative to Libya was moving to Tripoli on Monday to re-establish full diplomatic presence.
"Today the UK's Special Representative [John Jenkins] is deploying to Tripoli to re-establish our full diplomatic
presence," he told parliament.
In another development, media reports on Monday suggested that Chinese arms firms had offered to sell weapons worth about $200m to Gaddafi's forces in July.
While China's foreign ministry acknowledged that talks had taken place, it denied prior knowledge.