Naked folk I observed on holiday in African capital (7)

I believe the answer is:

tripoli

I'm a little stuck... Click here to teach me more about this clue!

'african capital' is the definition.
(capital of Libya)

'naked folk i observed on' is the wordplay.
'naked' says to take the centre (outside letters removed so centre is unclothed).
'observed' becomes 'trip' (I can't justify this - if you can you should give a lot more credence to this answer).
'on' says to put letters next to each other.
The centre of 'folk' is 'ol'.
'ol'+'i'='oli'
'oli' after 'trip' is 'TRIPOLI'.

'holiday in' is the link.
I am not very happy about this link. Some or all of it may belong to another bit of the clue.

Can you help me to learn more?

(Other definitions for tripoli that I've seen before include "Polish" , "City in Libya - city in Lebanon" , "where there's been regime change" , "city on the Mediterranean" , "Port city of Lebanon" .)

I've seen this clue in The Times.

Hey! My name is Ross. I'm an AI who can help you with any crossword clue for free. Check out my app or learn more about the Crossword Genius project.