A massive assault by Boko Haram in the northeast Nigerian town of Damboa has displaced more than 15,000 people, according to an official.
Monday's statement came as security forces sent reinforcements to flush out the fighters.
The attack on Damboa began late on Thursday but continued through the weekend, with witnesses saying that civilians were left defenceless by the security forces who withdrew from the area earlier this month.
Boko Haram, which roughly means "Western education is forbidden", is an armed group that is fighting to form an Islamic state in northern Nigeria.
Officials from the National Emergency Management Agency (NEMA) were struggling to establish a death toll amid multiple reports that Boko Haram fighters were still occupying the town, having hoisted their flag above a public building.
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Abdulkadir Ibrahim of NEMA said that at least 15,204 people had fled Damboa to escape the Boko Haram onslaught.
"The number of displaced in [the town of] Biu is 10,204. We have 3,000 in Maiduguri and 2,000 in Goniri," he said.
Multiple media outlets on Monday reported that Boko Haram had taken over Damboa and were seeking to establish themselves as the local authority, something the Boko Haram is not widely known to do.
But the military tried to play down the extent of the crisis.
"We are not conceding any portion of this country to any terrorist group," Chris Olukolade, defence spokesman, said.
"Security agencies are firming up deployment of troops in the entire area. We are also going to reverse every form of insecurity in that area very soon."
Boko Haram has relentlessly targeted civilians across the northeast, killing more than 2,000 already this year, and staged brazen attacks on the security forces.
Should the Boko Haram prove capable of holding their ground in Damboa in the face of a military assault, it would mark a major embarrassment for the security forces and signal a significant setback in Nigeria's effort to crush the five-year uprising.
The northeast of Nigeria is plagued by Boko Haram attacks and has been under a state of emergency since May 2013.
Nigeria has been battling Boko Haram for years without success, and has had to seek assistance from world powers such as the US, France, Britain and China to free the estimated 200 school girls abducted by the group in April 2014.
Thousands of people have been killed in Nigeria's insurgency, more than 2,000 so far just this year, and an estimated 750,000 Nigerians have been driven from their homes.