NATO has carried out airstrikes on the Moammar Gadhafi stronghold city of Bani Walid, as fighters seeking to rout him retreated after heavy battles there overnight, reports from Libya said Saturday.

A Reuters reporter on the ground said there were at least five explosions Saturday as NATO flew aircraft overhead. Earlier, anti-Gadhafi fighters pulled back from Bani Walid, saying they expected NATO attacks on the town.

In a new audio message from hiding, Gadhafi calls on his followers to rise up and fight, saying "this is the zero hour."

Gadhafi's latest message was broadcast repeatedly on the town's radio station Saturday night. In it, he urges supporters to fight and says those who don't will go to hell.

It appears the loyalists remain steadfast as anti-Gadhafi fighters came came under heavy attack in a desert valley three kilometres from Bani Walid Saturday afternoon. Loud explosions were heard as mortar rounds struck the area, releasing clouds of dust and smoke. Snipers also targeted rebel fighters, as ambulances sped up and down the main road into town.

Libya's new rulers had set a Saturday deadline for Gadhafi loyalists in Bani Walid, Sirte, and Sabha, deep in Libya's southern desert, to surrender or face an offensive.

On Friday, revolutionary forces also battled loyalists near Gadhafi's hometown of Sirte, 400 kilometres southeast of Tripoli, but withdrew after heavy casualties.

Gadhafi refuses to surrender

As the battle raged around the town of Bani Walid on Saturday, the head of Libya's interim administration, Mustafa Abdul-Jalil, was set to arrive in the Libyan capital, a major step toward establishing a post-Gadhafi government.

His arrival comes in the wake of an annoucement by the International Monetary Fund, which said it recognizes the anti-Gadhafi National Transitional Council (NTC) as the new government of Libya.

Former rebels took control of Tripoli in late August, and Abdul-Jalil's continued absence had raised questions about their ability to take charge.

After the fall of Tripoli, revolutionary forces chased retreating Gadhafi loyalists into four bastions of support for the former regime, including Bani Walid, Sirte, Sabha and Jufra.

However, it has proven difficult for the anti-Gadhafi troops to capture the first three towns, suggesting that the former dictator still commands some support. The fugitive Gadhafi has said he won't surrender and has exhorted his followers to keep fighting.

Revolutionary forces and regime loyalists had been engaged in off-and-on surrender talks in Bani Walid, a town some 140 kilometres southeast of Tripoli, for more than a week. Fighting erupted on Friday and escalated Saturday.

The commander of the assault, Daw Salaheen, called on the city's residents to lay down their arms, saying anyone who does so will be "safe in our hands."

Volunteers asking to join the battle said Saturday they were getting increasingly impatient with the standoff. Abdel Wahab Milad, a 26-year-old teacher from the town of Gharyan, drove dozens of miles to the front in a pickup truck with six friends. Dressed in army fatigues, he said he signed up for battle because it was time to "get rid of Gadhafi once and for all."

On Friday, officials in neighbouring Niger said four senior Libyan military officers have entered the country. Justice Minister Amadou Morou said late Friday that the Libyan chief of staff of the air force, his pilot and the commanders of two Libyan military regions have arrived in Niger. Morou declined to name the officers.

A previous convoy earlier in the week saw between 200 and 250 armoured vehicles cross into Niger's northern desert, escorted by the Nigerien army, according to media reports. There was speculation Gadhafi and his son Saif al-Islam, both wanted by the International Criminal Court on charges of crimes against humanity, would be in the convoy because the West African country of Burkina Faso, which borders on Niger, has offered them asylum.