Officials said the battle took place Monday at the Baga Fish Market in Maiduguri.
The incident highlights a threat to the Nigerian government even greater than the guerrillas involved in the Emancipation of the Niger Delta, who have been battling the Nigerian government for years over its policies in Nigeria's coastal oil producing states.
"Boko Haram" was the name given to Islamic militants by residents of Maiduguri where the movement had its headquarters, after its formation in 2002 by Muslim zealot Muhammadu Marwa, Nigeria's Daily Trust newspaper reported Tuesday.
The group's official name is Jama'atu Ahlis Sunna Lidda'awati wal-Jihad, which in English means, "People Committed to the Propagation of the Prophet's Teachings and Jihad."
The Hausa term "Boko Haram" translates as "Western Education is Forbidden." The militants say they are against what they term as Western influences, including voting in elections or receiving a secular education.
Boko Haram adherents are reportedly influenced by the Koranic phrase which says, "Anyone who is not governed by what Allah has revealed is among the transgressors."
Although Boko Haram's founder, Mohammed Yusuf, was killed by Nigerian security forces in Maiduguri in 2009, the movement has continued to flourish.
In the last three years Boko Haram has attacked police stations, military barracks and Christian churches. Hundreds civilians have been killed as Boko Haram attempts to establish an Islamic state with all of Nigeria governed by Shariah.
Boko Haram has instigated a number of brazen attacks in different parts of northern Nigeria to increase its presence across the region. The assaults have heighted tensions between Muslims and Christians.
These attacks include the 2011 Christmas Day bombings on the outskirts of the capital Abuja and in the northeastern Nigeria city of Damaturu, a 2010 New Year's Eve attack on a military barracks in Abuja and several explosions timed to coincide with the inauguration of President Goodluck Jonathan last May, which were followed by the bombing of the police headquarters and the U.N. headquarters in Abuja.
Washington has grown increasingly concerned with Boko Haram's assaults on Nigeria's government and a U.S. congressional report last November warned that Boko Haram was a direct "emerging threat" to the U.S. and its interests, concluding that the militant group could be forging ties with al-Qaida affiliates in Africa, even as Boko Haram denied such a connection.
Analysts observing the movement say that the Boko Haram threat will disappear only if the Nigerian government addresses the chronic poverty of its citizens and constructs an educational system local Muslims can support.