A suicide bomber is suspected of being behind the blast which reportedly occurred near a busy market around 1 P.M. as Muslims marked the Eid-el-Maulud.
The military confirmed to the British Broadcasting Corporation, BBC that an explosion had occurred, but did not give a figure for casualties.
An eyewitness said he had seen what appeared to be dead bodies on the ground, and another spoke of seven fatalities.
A second car is reported to have been set on fire by the blast but details are still sketchy.