Can I set permissions on file folders in Azure using shared access key authorization

Question

We are a small company and are currently migrating our data to the cloud and have been told by the IT company (who was told by Microsoft Support) that because of something they can't identify in our internal settings we are unable to use Azure AD. The work around they propose is to use shared key access.

Our users have internal data that needs to be protected by other users (within the company). This is a privacy issue not a "threat" issue but is still important.

We've been told that permission settings on folders is not possible. At all. We can only apply passwords to specific files within folders. I am talking about Security Settings in the Properties of a folder (image attached).

Can anyone tell me how to do this or if it can actually be done?

TIA- Linnie Smith