Computers and office appliances were among items said to have been destroyed in the inferno.
Although no-one could ascertain the cause of the fire, sources at the mansion, who pleaded anonymity, said it could have been caused by an electrical fault.
The fire was said to have started barely 20 minutes after Obasanjo left the house for an undisclosed place. He was however said to have hurriedly returned to his burning building to supervise those fighting to quench the fire.
His wife, Bola, children and grandchildren, said to be on holiday, were reportedly moved to safer sections of the mansion as the fire raged.
A source said one of the aides to the retired general noticed smoke bellowing from a section of the mansion about 4.10pm.
The aide was said to have raised the alarm to attract the attention of other occupants of the building, including security officials, who quickly moved to stop the fire from spreading to other part of the house.
The raging inferno however got out of hand and the State Fire Service and the Nigeria Security and Civil Defence Corp were called in for help.
Our correspondent also learnt that before the arrival of the firefighters and the NSCDC officials, some of the workers had made attempts to climb up the building in an attempt to put out the fire.
By the time the firefighters and civil defence officials arrived at the mansion, our correspondent learnt that the fire had spread to other parts of the building, said to include the bedroom of the former President.
Plainclothes policemen denied access to the residents of the area who thronged the house from entry.
Among the early callers at the building was the state Commissioner of Police, Ikemefuna Okoye; the state Director, State Security Services, Mr. Joseph Okoh; former Minister of Finance, Dr. Onaolapo Soleye; and some officials of the state government.
However, Obasanjo told reporters that only his secretaryâ€™s office caught fire and not the whole building.
Speaking in Yoruba he said, â€œI hope all of you understand Yoruba. You can see that only the secretaryâ€™s office was gutted by fire and not the entire house. So, go and report it properly.â€
He then burst into singing in Yoruba and in his usual comical and jocular manner, he sang, Ile Obasanjo to jo, ewa lobusi, meaning (Obasanjoâ€™s house thatâ€™s razed by fire will become more beautiful).