* Witness says some kidnappers also killed in gunbattle
* Italian abducted in western Nigeria (Adds army saying it did not know hostage was in hideout)
By Joe Brock and Mike Oboh
ABUJA, May 31 (Reuters) - A German man held hostage in northern Nigeria by a group linked to al Qaeda was killed on Thursday during a raid by Nigerian forces, according to the army and security sources.
Edgar Fritz Raupach was seized in the north's main city Kano in January. A group claiming to be al Qaeda's North African wing said in March it was holding him and demanded the release of a Muslim woman imprisoned in Germany in exchange for his freedom.
Kidnapping foreigners has become a common tactic of Al Qaeda in the Islamic Maghreb (AQIM), which operates out of Nigeria's neighbour Niger, as well as in Mali, Algeria and Mauritania. Officials believe it also has links with Nigerian militants.
A statement from Nigerian security forces in Kano said they had raided the hideout of some "terrorists' senior commanders" in Kano, apparently unaware they were holding the hostage.
"Upon search of the premises by security forces, we found the handcuffed, gruesomely murdered corpse of an expatriate, later identified as the German national, Mr Edgar," it said.
The incident bore an eerie resemblance to a botched rescue attempt by combined British-Nigerian forces in March to free a British and an Italian hostage held for almost a year. They were also killed by their captors during the raid.
They had appeared blindfolded in a video that said they were being held by al Qaeda.
The security forces' statement said Thursday's gun battle with the insurgents lasted for about 30 minutes.
"During the encounter five of the terrorists were killed," it said. "The German was apparently killed by the terrorists on noticing the security forces."
"CORPSE"
Civil servant Ibrahim Mohammed said he had witnessed the raid.
"I saw some corpse inside the military vehicle after the raid at Danbare Quarters close to the new site campus of Bayero University," he said by telephone from Kano, an ancient city once at the heart of a medieval Islamic caliphate through which the riches of trans-Saharan trade caravans passed.
"The military blocked all entrance to the area."
The military's statement did not pin the blame on the homegrown Nigerian Islamist sect Boko Haram, as often happens.
Factions of the sect are believed to have been behind similar kidnappings. But the main arm of Boko Haram, which has claimed responsibility for attacks that have killed hundreds this year, has vehemently denied this.
Boko Haram has increasingly moved into Kano, a city of around 10 million people in north-central Nigeria, from its home base of Maiduguri in the northeast. A coordinated series of gun and bomb attacks in Kano killed 186 people in January.
Some Boko Haram members are known to have received weapons and training from AQIM, but security experts say the groups still have separate command structures.
In an unrelated incident, an Italian engineer was abducted by a group of armed men in Kwara state in western Nigeria, the Italian Foreign Ministry said on Thursday.
Nigerian security sources said they believed that kidnapping to be the work of a criminal gang, not an Islamist militant group. (Writing and additional reporting by Tim Cocks; Editing by Kevin Liffey)
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