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Background
Back in Henselt's camp, Adam Pangratt told you of a very strong arm wrestler by the name of Numa, or Mighty Numa, as he's called by his fans. Once you arrive in Loc Muinne, you'll meet this circus artist. The quest starts either from Numa himself or the notice board (
#1).
Walkthrough
There are essentially two ways through which you can complete this quest. Once you challenge the Mighty Numa (
#2), you'll have an option to arm wrestle him. No matter what you do, you'll lose because the orange bar is incredibly small and the cursor which you have to keep inside is shaking very violently. Now you have two options, either tell Numa that he cheats (10 experience points) or just deal with the fact that you lost and try to find out why.
If you accuse Numa of cheating, he'll go aggressive and say that he can beat you any day without a problem, to which you can answer with an intimidating option. As a result, Numa will reply that he can beat you even without "aids". Once you try to wrestle him the second time, he'll have a long orange bar and is, in fact, the easiest arm wrestling opponent in the game.
The other option is to find out the source of Numa's strength. Talk to Marcus nearby who sells Anabolic Steroids. These are imbibed as potions, so just drink one and wrestle Numa again. As you try to beat him this time, the orange bar will be huge and the victory's yours.
Bets with Numa go from 100 to 200 orens, and in both resolved situations you'll receive 25 experience points (though the first one grants 10 more). As a reward, you'll also get
Diagram: Long, Robust Gauntlets.
1 - Notice board
2 - The Mighty Numa & Marcus