A truck is said to have exploded as it was off-loading butane cooking gas in the town of Nnewi in Anambra State.
Reports of fatalities vary from 35 to more than 100 people killed, including factory workers and neighbors.
Local police have confirmed the incident but have yet to provide further details. A huge fire reportedly followed the blast.
The dead and injured were taken to the Nnamdi Azikiwe University Teaching Hospital in Nnewi which has a predominantly Christian community.
Witnesses said people had gone to the plant to fill up gas bottles ready to cook meals on Christmas day.
A reporter for Associated Press counted the remains of 100 bodies.
Another witness told the Vanguard newspaper that the blast was triggered when a truck began discharging cooking gas without waiting for the mandatory cooling time.
Passersby were also caught up in the explosion, the newspaper reported.
Witnesses described a huge fire with acrid black smoke hovering over the scene of the disaster.
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