Soboma George, a one-time militant leader who accepted a government amnesty last year, was shot during a gunfight in the oil hub of Port Harcourt, the capital of Rivers state, before being taken away by gunmen.
"He was shot in a clash between rival cult groups around the Nembe area of Borokiri, in Port Harcourt," Rivers state police spokeswoman Rita Inoma-Abbey said, adding one woman was killed.
"We are monitoring the situation so that it does not degenerate," she said.
Security sources said George, who originally led a gang called the Outlaws and has a significant following in Rivers state, had been killed in the shootout.
Police could not confirm whether he had died.
The restive Niger Delta, the heartland of Africa's biggest oil and gas industry, has been relatively peaceful since last year's amnesty programme, which saw thousands of former militants hand over weapons in return for clemency.
But many of the criminal gangs notorious for blowing up oil pipelines and kidnapping oil workers originally enjoyed political backing and were set up to help rig elections, rights groups and security analysts say.
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