You must have category colors applied to your calendar from another Outlook endpoint (OWA, Desktop, or Mac). It cannot currently be controlled from mobile alone. You cannot edit or apply category colors to events on Outlook for Android.
If you have updated the color of a category on OWA, Desktop, or Mac and you don't see the colors reflected on Outlook for Android, please restart your app and that should solve the issue.
Where do I find my category color label?
Click into an event with a category applied and expand the Show More section to see your label.