The background color cannot be changed by editing the Ly config file at /etc/ly/config.ini. The bg variable in that config file refers only to the dialog box and the 'menu bar' at the top. The actual background of the entire screen will always be black no matter the bg value.
Somewhat confusing, I know.
There are a couple of ways we can edit the background (and foreground) colors. To better understand how we can achieve these goals, it's important to understand that we're actually not modifying the behavior of ly per se, but changing the colors of the tty session itself.
First, edit the file at /lib/systemd/system/ly.service and add the following in: