Residents said gunmen stormed the town at roughly 4:00 am (0300 GMT) on Wednesday, armed with heavy weapons and tossed explosives into various buildings, forcing residents to flee into the surrounding bush.
"We are collating the figures and the death toll has risen to 60 from the Bama attack," said Lawal Tanko, the police commissioner in Borno state, which is the epicentre of Boko Haram's four-and-half-year Islamist uprising.
"The toll is likely to rise," he said. "The attackers caused enormous destruction. They burnt down some of the major landmarks in the town including the local government secretariat," and the palace of the area's top cleric, Tanko added.
He said the airforce dispatched fighter jets to suppress the raid from its base in the state capital Maiduguri some 60 kilometres (40 miles) away and dropped bombs on the fleeing insurgents.
"I can't say how many of the gunmen were killed but the number is huge," Tanko said.
The latest unrest in Nigeria's embattled northeast came as Boko Haram's leader Abubakar Shekau threated to widen his rebellion to the southern oil-producing Niger Delta region.
In a video statement delivered to AFP Wednesday, Shekau promised to strike the region which churns out some two million barrels of crude per day, the highest oil output in Africa.
Shekau has made various threats in a series of videos since 2012 and many have not materialised. It is not clear if the extremist leader, declared a global terrorist by the United States, has the capacity to spread Boko Haram's violence beyond the group's stronghold in the northeast.
Boko Haram has killed thousands in the north and centre of the country since 2009 in its rebellion aimed at creating a strict Islamic state in Nigeria's north.
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