If you’ve ever asked your child to fetch something, only to have them walk to wherever it is, and return with it, then that’s a good sign that this is exactly the case.
The trouble with a 16 month olds speech is therefore not understanding, but mechanics. Your child is still learning how to coordinate his or her lips, tongue, and breath in order to form the words in a coherent way.
The best thing you can do for your child is to avoid ‘baby talk.’ Use the correct words for objects, and correct him or her gently when they get them wrong, by repeating the word correctly.
The more your child listens to language, whether it’s ordinary conversation or reading, the better and faster they will learn to speak properly.