actually this part was wrong;
if (!-f $site_folder) {
rewrite ^/[^/]+/(.*) /$1;
}
needs to be:
if (!-d /etc/nginx/html/production/$site_folder) {
rewrite ^/[^/]+/(.*) /$1;
}
* changed -f to -d
** had to add root path before $site_folder
Posted at Nginx Forum: http://forum.nginx.org/read.php?2,251908,251939#msg-251939