The town, which has been hit several times by militants, lies on the border of Borno and Yobe states. Borno is the heartland of Boko Haram's six-year insurgency, which aims to carve out an Islamic state.
Ngamdu is about 100 km (60 miles) east of Borno state capital Maiduguri and about 40 km west from Yobe state capital Damaturu, and lies near a road that is a major transport artery between the two states.
A security source said the casualties and wounded were mainly bus and truck drivers. Around six drivers died, he said.
A commercial driver, Mamman Abdullahi, said the insurgents came to Ngamdu at about 9:30 A.M. (0830 GMT) but were pursued by soldiers.
"They came back later on horse, shooting at people. Many were killed and some of our drivers were injured," he said.
Three drivers and some passengers were hit by bullets and being treated in a Maiduguri hospital, Abdullahi said.
Five people were being treated for serious injuries after the attack at Maiduguri's Umaru Shehu Hospital, a Reuters reporter witnessed, but more were being treated for wounds in other locations.
Vehicles on the road to Yobe were told to turn back due to the raid, bus driver Ali Sunoma, who was stopped at a military checkpoint, told Reuters.
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