Bet it's sweat. Anyone with a leather watchband probably knows the smell. That's why I never buy them anymore. That rough suede is pretty absorbant.
Yeah it is. Sounds to me like it's time for you to get a CTAC or MTAC... Or maybe a FIST Kydex holster, or any number of holsters that are not made of sponge-like material. The problem will probably return even if you do deal with it.