Plans for Sharia led to fierce fighting in Kaduna
The BBC's Yusuf Sarki Muhammad in Kaduna says that this is the first time that a traditional chief has been arrested in connection with ethnic or religious violence and is a sign that the government is taking the problem seriously.
At least 10 people were killed and hundreds more fled from the town of Gwantu in Nigeria's northern state of Kaduna after the violence.
Modified Sharia
Most of those who fled were Muslims, the minority community in the town.
Government troops have been sent to the area to restore order.
The violence began on Friday after Kaduna introduced a modified version of Sharia or Islamic law in an attempt to keep Muslims and Christians in the state happy.
However the state government says that the violence was the result of a personal dispute between Mr Yakubu and Mr Bala over the siting of a new market and offices.
A judicial panel has been set up to investigate the causes of the violence.
Divided capital
Plans last year to introduce Islamic courts were put on hold after riots in the city of Kaduna in which more than 2,000 people were estimated to have died.
The political capital of mainly Muslim northern Nigeria has for years been divided along religious lines, but residents say those divisions have hardened considerably since the violence.
Islamic punishments are not being incorporated into the criminal code in Kaduna, as has happened in several other northern Nigerian states - but local communities are being given more power, through new customary and sharia courts, which will deal with civil matters.
The extension could also mean drinking alcohol is outlawed in some areas, but Christians should be exempt from this ban.
Mukhtar Sirajo, an adviser to Kaduna State Governor Ahmed Makarfi, told AFP news agency the system was designed to keep everyone in Kaduna happy.
'Keep everyone happy'
"Given the complex nature of our state and the unfortunate events we experienced last year, we will not implement the sharia as is done in other states," he said.
More than 70 sharia courts will be opened across the state and a similar number of customary courts will also be set up.
The Anglican Archbishop of Kaduna, Benjamin Achigili, told AFP that Christians would object to Islamic law if it affected them but would accept it if were only to affect Muslims.
Muslim mechanic Umar Ibrahim, whose brother died in the violence in February last year, said the arrangement was only partly what Muslims wanted but was acceptable given the violence in the state.
Kaduna is one of more than a dozen states in predominantly Islamic northern Nigeria which have adopted Sharia law in the past two years.