At least 115 people have been killed in Nigeria's northeast, more than 1,500 buildings razed and some 400 vehicles destroyed in the latest attack by armed groups, witnesses said.
Wednesday's night attack on Bama came as a traditional ruler accused the military of being scared to confront the fighters, the Associated Press news agency reported.
Sitting amid the smoking ruins of his palace, the shehu, or king, of Bama, Kyari Ibn Elkanemi, charged that the government "is not serious" about halting the violence.
The attack on Bama, an agricultural and commercial town, came the day the leader of the Boko Haram, a group blamed for widespread violence in the northeast, warned leading Nigerian Muslim politicians and religious and traditional leaders that his fighters would target them for pursuing democracy and Western-style education.
In the video message, punctuated by the crackle of automatic gunfire, Abubakar Shekau said: "The reason I will kill you is that you are infidels, you follow democracy ... Whoever follows democracy is an infidel and my enemy."
Shekau spoke in the local Hausa and Kanuri languages in the video, obtained by the AP on Thursday through channels that have provided previous communications.
Many more Muslims than Christians have been among the thousands of people killed in the 4-year-old rebellion by his Boko Haram.
The name means "Western education is forbidden", and the group aims to transform Nigeria into an Islamic state, even though half the more than 160 million citizens are Christians.
Boko Haram killed 106 people in Ighze village on Sunday, according to official figures, making it one of their deadliest assaults so far.
The military denied that Boko Haram were better armed or motivated and said it was making progress, but that no country facing terrorism had defeated it completely.
President Goodluck Jonathan ordered extra troops into northeast Nigeria in May to crush Boko Haram, which opposes Western influence and wants to create a state ruled by Islamic law in the country's largely Muslim north.
However, the offensive, backed by air power, has so far failed.
The fighters have retreated into the remote, hilly Gwoza area bordering Cameroon, from where they mount deadly attacks against civilians they accuse of being pro-government, and are abducting scores of girls.
Earlier on Wednesday, Boko Haram fighters attacked the house of an army general in the village of Buratai in Borno state, killing a soldier guarding it, Borno state police chief Lawal Tanko said.
He said General Umar Tukur Buratai, who is stationed in the southern oil-rich Niger Delta, was not there at the time of the assault, which had inflicted "minimal damage".
Nigeria, Africa's largest oil producer, derives more than 90 percent of its foreign exchange earnings from oil.