Simon,

I would first try removing the IN clause as the replace needs to occur in the work area being scanned. Also you can reduce the replaces to a single line as I show below.

SELECT *,SPACE(8) as nafseq2 from znaf INTO TABLE datax\znaf2

seq=8950
SCAN
   seq=seq+1
   replace nafseq2 WITH ALLTRIM(nafseq), ;
           nafseq  WITH STR(seq,8)
ENDSCAN

When this is run what is in the nafseq2 field of the table znaf2?