Abductors seized an envoy who delivered a ransom payment for the release of more than 100 Nigerian children abducted in May.
Northwest and central Nigeria are a hotbed of cattle thieves and kidnappers who raid villages, killing and abducting residents after looting and burning homes.
The gangs have recently stepped up attacks on schools, kidnapping students to squeeze ransom from parents.
On May 30, around 200 motorcycle-riding gunmen, known locally as bandits, stormed Tegina town in central Niger state and abducted 136 pupils from an Islamic seminary.
Last month, 15 of the hostages escaped while their captors were asleep in a remote village in neighbouring Zamfara state where they were being held.
On July 20, parents and school officials sent a 60-year-old man, Kassim Tegina, to deliver 30 million naira ($73 000) to the kidnappers, but the bandits seized him after collecting the money.
Abubakar Alhassan the headteacher of Salihu Tanko Islamic school where the children were snatched said Monday:
To our shock, the kidnappers took the money and seized the courier and refused to release the children.
They were angry that the ransom was too small. We don’t understand what they want because that was the amount we agreed on after a series of phone negotiations.
The kidnappers said they were holding him along with the children until more money had been paid.
The headteacher said the bandits had initially demanded 200 million naira ($487 000) but later reduced the amount to 30 million naira.
The ransom was said to have been raised by parents and through voluntary donations from concerned people and groups.
Alhassan said they cannot raise any more ransom money adding “We have resigned to fate.”
The state government has repeatedly vowed not to pay ransom to kidnappers.
Around 1 000 schoolchildren and students have been kidnapped in Nigeria since December.
More: Pindula News; AFP