Hi, guys I'm new to this forum and I'm in Arnika and have explored the entire city. I've talked with every NPC. I don't know what to exactly do now.
Can you guys help me out.

Well... leave.

You can head southish towards the graveyard and trynton, or northish towards mt gigas.

Youll be back several times.

Trynton is the usual next stop after cleaning up Arnika, though some prefer Gigas first. It doesn't matter too much, though I always went to Trynton first myself (that includes visiting the graveyard along the way).

Any time you find a place too difficult to handle, just back off and go somewhere else. The game is pretty open in that regard for awhile.

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or you could stay on and fight with the enemies there to level up and train your skill. The town is full of tight spot where you can fight you enemies one at a time.

A fourth alternative would be to head back to the Monastery and pick up the items that you couldn't get to before. If that doesn't make sense, try offering some of the less-obviously-useful items you picked up in the Monastery to the likely candidate NPC. The NPC will tell you what you need and where it is, and you'll also get a Journal entry.