I believe the issue is related to termguicolor. I have the following in my neovim config:

set termguicolors

From the docs:

When on, uses |highlight-guifg| and |highlight-guibg| attributes in the terminal (thus using 24-bit color). Requires a ISO-8613–3 compatible terminal.

If that option isn’t enabled, neovim will usectermbg and ctermfg as you have discovered.

One quick note, I did have to use something like ctermbg=5 instead of ctermbg=#333333 as it doesn’t appear that hex color values are valid options for cterm* .

Thank you for letting me know about the issue and please let me know if you find anything else. I will updated the article to include this info.