If it’s not too late, just how separate do your users need to be from each-other? If they simply should not be shown to each-other in contacts or as options for sharing, there are options for that within a single Nextcloud instance. For example: “Restrict users to only share with users in their groups”
In using that, I’ve not seen the users from other groups show up as options in any share list.
If you need more robust separation, then yes, federation between instances is still your best bet.