Heat a large frying pan over high heat and add the hazelnuts. Cook, stirring or moving the pan constantly for 8 to 10 minutes, or until you notice some of the skin is coming off and they start to brown.
Remove from the heat and transfer them onto a clean lint-free kitchen towel.
Gently rub them together with the towel until most of the skin comes off. You might need a bit of help with a knife to get most or all of the skin off of the hazelnuts. If some remains, it’s okay.
Place hazelnuts in a high powered blender (such as vitamix) or food processor and mix until it starts to liquify and look like butter. Scrape the sides as needed to make sure you get all of the nuts.
Add the powdered sugar, cocoa powder, vanilla, and coconut oil and blend until combined.
Melt the chocolate in the microwave for 20 second intervals, stirring between each interval, until completely melted. Make sure you don't burn the chocolate - if it’s nearly melted, let it just sit on the counter for a minute. When you stir it again, any remaining chunks will likely be melted.
Pour the chocolate into your hazelnut mixture and continue blending until it is evenly combined.
Once you have the mixture you can use a strainer with tiny holes or a cheesecloth to better strain the nutella if desired.
Pour into a clean jar and let it cool completely. Store in the refrigerator.
Notes
Makes about 1 cup of Nutella.
I recommend straining it with a strainer and then with a cheesecloth if you want it super smooth.
If you prefer, you can use all milk chocolate or all semi-sweet chocolate to change the flavor of your homemade Nutella. Milk chocolate will make it sweeter.