In the kitty terminal it is impossible to see the highlighting, regardless of colour scheme.
Steps to reproduce:
Same issue here. The selected item is not highlighted.
It's not exactly invisible, just hard to notice. The focus on screenshot below is on Cargo.lock:

It would be great if the background was highlighted instead.
That is actually visible for me. This is what I am seeing:

Had the same problem, but looking through the docs I found a solution. Make a config file and put the settings in it:
Default path for the config file:
Linux: ~/.config/jesseduffield/lazygit/config.yml
MacOS: ~/Library/Application Support/jesseduffield/lazygit/config.yml
Windows: %APPDATA%\jesseduffield\lazygit\config.yml
gui:
theme:
lightTheme: true
activeBorderColor:
- black
- bold
inactiveBorderColor:
- black
selectedLineBgColor:
- default

Thanks for pointing that out @a-elhag . I'm not aware of any way around this issue in alacritty. Does anybody have suggestions on how we could get around it, or failing that, how to make the config-based solution easier to find?
Had the same problem, but looking through the docs I found a solution. Make a config file and put the settings in it:
Default Path
Default path for the config file:
Linux: ~/.config/jesseduffield/lazygit/config.yml MacOS: ~/Library/Application Support/jesseduffield/lazygit/config.yml Windows: %APPDATA%\jesseduffield\lazygit\config.ymlAnd put these settings in it
gui: theme: lightTheme: true activeBorderColor: - black - bold inactiveBorderColor: - black selectedLineBgColor: - defaultHow the highlighting now looks
If I add the configuration it looks like this afterwards:

@mordax777 can you see how you go with:
inactiveBorderColor:
- white
@jesseduffield sorry for the late reply. Here the result.

@mordax777 I played around with the settings and got something that worked for me. I'm using Kitty. The docs helped.
gui:
theme:
lightTheme: false
activeBorderColor:
- white
- bold
inactiveBorderColor:
- white
selectedLineBgColor:
- reverse
- blue

@bahelms Thanks, that fixed the problem!
For people in the future, I will add that I had the same issue as @benruijl, and it was solved by going into my terminal settings and allowing bold fonts.
There is the same issue in windows Terminal.
Most helpful comment
@mordax777 I played around with the settings and got something that worked for me. I'm using Kitty. The docs helped.