WASHINGTON (Reuters) - Describing corruption in Nigeria as "unbelievable," U.S. Secretary of State Hillary Clinton on Tuesday suggested the government's failure to deliver basic services helped foster extremism in young people, such as the Nigerian accused of trying to blow up a U.S. jet on Christmas.

Speaking in blunt terms at a "town hall" meeting with State Department officials, Clinton said Nigeria, Africa's biggest energy producer and second-largest economy, "faces a threat from increasing radicalization that needs to be addressed.

"The failure of the Nigerian leadership over many years to respond to the legitimate needs of their own young people, to have a government that promoted a meritocracy, that really understood that democracy can't just be given lip service, it has to be delivering services to the people, has meant there is a lot of alienation in that country and others," she said.

She suggested poor governance and deteriorating living conditions made Nigeria's disaffected young people ripe targets for militants looking for recruits to attack the West.

Nigerian Umar Farouk Abdulmutallab, 23, who U.S. officials believe was trained by al Qaeda in Yemen, is accused of trying to blow up a U.S. airliner as it approached Detroit from Amsterdam on December 25 with almost 300 people on board.

"The information we have on the Christmas Day bomber so far seems to suggest that he was disturbed by his father's wealth and the kind of living conditions that he viewed as being not Islamic enough," saying that these are not unusual views for young people to have toward their families.

"But in this case, and in so many others, such young people are targets for recruiters to extremism," she added.

"There has to be a recognition that in the last 10 years, a lot of the indicators about quality of life in Nigeria have gone the wrong direction," she said, citing growing illiteracy and worsening health statistics.

"The corruption is unbelievable," she said, saying when she met with a group of Nigerians in the capital, Abuja, "people were ... standing and shouting about what it was like to live in a country where the elite was so dominant, where corruption was so rampant, where criminality was so pervasive.

"And that is an opening for extremism that offers an alternative world view," she added.