On general analogies, such a place would be called Lyga or Lyge, but this is only attested as a noun designating twilight (see under lambda 766, lambda 770). The present headword itself, besides being the name of a mythological figure (grandfather of Penelope: Strabo 10.2.24), is thus most commonly met as an adjective meaning gloomy or murky or shadowy. Since the equivalent entry in ps-Zonaras contains the quotation 'the topos was gloomy to them', there must be a strong chance that our own lexicographer has misconstrued this.
If [NF] the entry is, nevertheless, a geographical one:
Perhaps a reference to the land of the Lugii; Tacitus, Germania 4.3.2.
Or very tenuously, perhaps derived from Alexander the Great's mysterious Leugaian ile (squadron of cavalry); Arrian 2.9.3.